Friday 15 / November / 2024
Beijing: China's June consumer inflation grew at its slowest pace since January as increases in food prices eased, while producer prices extended their decline, reinforcing economists' views that more government stimulus steps will be needed to support the economy.
The consumer price index (CPI) rose 1.9 per cent in June from a year earlier, compared with a 2.0 per cent increase in May, the National Bureau of Statistics said on Sunday. Analysts had expected a 1.8 per cent gain, a Reuters poll showed.
Consumer inflation has remained low compared with the official target of around 3 per cent for this year, indicating persistently weak demand in the world's second-largest economy.
Food prices were up 4.6 per cent in June, compared with a 5.9 per cent gain in the previous month. Prices of China's staple meat rose 30.1 per cent, compared with a 33.6 per cent increase in May.
But recent flooding in China "is likely to push vegetable and fruit prices higher in the coming months," ANZ economists Raymond Yeung and Louis Lam wrote in a research note.
Non-food prices inched up 1.2 per cent in June versus May's 1.1 per cent gain.
"In our view, while China reiterates the importance of supply-side reform due to debt and overcapacity concerns, the authorities still need to stimulate demand in order to achieve its growth target," Zhou Hao, senior Asia emerging market economist at Commerzbank in Singapore, said in a note.
The People's Bank of China (PBOC) last cut interest rates on October 23, the seventh time since late 2014, as the government took steps to counter slowing economic growth.
China's leaders have set an economic growth target of 6.5 per cent to 7 per cent for 2016. The economy expanded 6.9 per cent last year, its slowest pace in a quarter of a century.
A top government-backed think tank forecast in late June that consumer prices will likely rise 2 per cent for the year, while the long decline in producer prices will ease.
"Of course, further policy easing is still on the cards, and we hold our view that the PBOC will cut both interest rates and reserve rate requirement this month," Zhou said.
Other economists say authorities should use fiscal policy to boost growth, adding that question marks remain over the effectiveness of further monetary easing.
Producer prices
In June, the producer price index (PPI) dropped 2.6 per cent from a year earlier. Analysts had expected PPI to fall 2.5 per cent.
The decline extended a falling streak to 51 consecutive months, though it continued to moderate, suggesting strains on companies' profits may be easing. The PPI eased 2.8 per cent in May.
Producer prices for mining fell 8.2 per cent in June from a year earlier, while raw materials dropped 6.1 per cent.
China is due to release its second-quarter gross domestic product (GDP) data on July 15, along with figures for June's industrial output, investment and retail sales.
Most analysts say GDP growth likely edged lower in the second quarter from 6.7 per cent in the first on a year-on-year basis, with June data showing a slight loss of momentum from May.
The China Academy of Social Sciences (CASS) predicted that the economy will grow about 6.6 per cent in 2016, decelerating from last year.
Worries about a potential economic fallout from Britain's decision to leave the European Union last month have reinforced expectations Beijing will roll out more policy support soon.
