Tuesday 19 June 2018

China's inflation rate slows in Feb

Beijing, March 10, 2012

China's inflation rate slowed sharply in February and factory output eased, data showed yesterday, adding to evidence of a slowdown in the economy and giving Beijing more room to relax credit limits.

The figures from the National Bureau of Statistics come as the economy faces headwinds over Europe's debt crisis and sluggish growth in the US, which are hurting export-driven China.

The consumer price index rose 3.2 per cent in February - the lowest since June 2010 - compared with 4.5pc in January, when spending before the Chinese New Year holiday drove up retail prices, the government said.

Before January, inflation had eased for five straight months after hitting a more than three-year high of 6.5pc in July and analysts had expected the downward trend to resume in February as the economy continued to slow.

Premier Wen Jiabao warned consumer prices remained high and the government's aim was to keep the inflation rate within 4pc this year.

His remarks suggest policy makers will be cautious in relaxing the tight credit restrictions imposed in the past two years, while as he also forecast 2012 economic growth to slow further from the blistering pace of previous years.

The producer price index, which measures the cost of goods at the farm and factory gate and is a leading indicator of consumer prices, flatlined in February compared with a 0.1pc increase in January.

Inflation has triggered social unrest in the past and senior leaders are anxious to keep prices of basic goods such as vegetables, meat and housing under control ahead of a once-a-decade power transition that begins later this year.

Beijing has twice lowered the banks' reserve requirement ratio in the past three months, effectively increasing the amount of money they can lend, and analysts said they expect further such moves in the coming months.

But they ruled out aggressive interest rate cuts, especially against a backdrop of rising global oil prices, as they could fuel inflation in energy-guzzling China.

Other data yesterday showed industrial output rose 11.4pc in the first two months of 2011, compared with a year ago. The figure was below December's increase of 12.8pc and analyst forecasts for 12.4pc, according to Dow Jones Newswires.

Urban fixed asset investment expanded 21.5pc in the first two months, compared with the same period last year, beating expectations for an increase of 19pc. Retail sales rose 14.7pc in the two-month period.

Beijing combines the January and February figures for output, investment and retail sales due to distortions caused by the Lunar New Year holiday, which falls within the first two months of the year.

China has cut its economic growth target to 7.5pc this year from 8pc last year, in an official acknowledgement that the export-driven economy is slowing as the euro zone crisis and slow pick up in the US hurts demand for its products.

The Asian powerhouse expanded 9.2pc last year, slowing from 10.4pc in 2010, as global turbulence and efforts to tame high inflation put the brakes on growth.-Reuters

Tags: inflation | China | slow |


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