Inflation falls to 13-month low
2014-March-10 Source: China Daily Website
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China's consumer inflation slid to a 13-month low of 2 percent in February, official data showed Sunday, triggering speculation about potential monetary easing to spur the current insipid economic growth.

The consumer price index (CPI), a main gauge of inflation, increased by 2 percent in February from the previous year, the National Bureau of Statistics (NBS) said Sunday.

Pork prices dropped 8.7 percent year-on-year, which brought down the overall CPI by around 0.29 percentage points, the NBS said.

The CPI had risen by 2.5 percent in January, the same as in December, the data showed.

February's reading was well below the 3.5 percent consumer inflation limit announced in the government work report delivered by Premier Li Keqiang on Wednesday during the ongoing annual two sessions.

The February CPI might be the lowest point this year, and was largely in line with expectations, Yang Weixiao, a Beijing-based macroeconomic analyst with Lianxun Securities Co, told the Global Times Sunday.

The falling pork prices as well as a high base of comparison were the main factors contributing to the low reading in February, economists at Bank of Communications in Shanghai said in a note sent to the Global Times Sunday.

Price levels may go up in the future if domestic demand warms up, but the consumer CPI for the whole year is unlikely to exceed 3 percent, the economists predicted.

The low CPI came at the same time as a continued drop in the producers' price index (PPI), which was down for the 24th consecutive month.

The index fell by 2 percent year-on-year in February, having fallen by 1.6 percent in January, according to the bureau.

The tepid price data is a reflection of weak consumer demand and continuing difficulties for enterprises, Lu Zhengwei, chief economist with Industrial Bank Co in Shanghai, said Sunday on his Weibo account.

Lu also said the CPI and PPI readings could point to possible deflationary pressures.

Some economists said that the People's Bank of China (PBC), the central bank, may fine-tune its monetary stance to prop up the economy.

"We believe the low inflation gives the PBC more room to ease the liquidity situation," Lu Ting, chief China economist at Bank of America Merrill Lynch in Hong Kong, said Sunday in a research note sent to the Global Times.

If the CPI falls below 2 percent, interest rate cuts might be announced, although the government has shown rising tolerance for lower growth, Guan Qingyou, an economist with Minsheng Securities in Beijing, said in a Weibo post Sunday.

However, Yang of Lianxun Securities noted that the CPI reading doesn't mean there is little inflationary pressure, as the general price level has been rising steadily on a monthly basis.

The CPI rose by 0.5 percent in February from January, the NBS data showed.

"There won't be any changes in the monetary stance," he predicted.

China will continue to implement a prudent monetary policy, Premier Li said while delivering the government work report, which set a target for growth in broad money supply (M2) at around 13 percent for the year, unchanged from the target for 2013.

The actual growth in M2 reached 13.6 percent last year, according to data from the central bank.

Despite economists' opinions about the implications of the price data for future policy moves, ordinary consumers said in numerous Weibo posts following the NBS announcement that prices are still too high.

"The current price level is truly high. It's really not easy living in big cities," a Weibo user with the handle yingluoSoma in Guangzhou, South China's Guangdong Province, said Sunday.

Source: Global Times

Editor: Olivia
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