China's inflation slows to 29-month low

China's inflation slowed in June to its lowest level in 29 months, official data showed Monday, giving the government more flexibility in its efforts to reboot the world's second-biggest economy.

The country's consumer price index (CPI) rose by 2.2 percent year-on-year in June, the National Bureau of Statistics said, down from 3.0 percent in May and the lowest figure since January 2010.

The inflation rate for the first half of 2012 was 3.3 percent, the bureau said, well below the government's full-year target of 4.0 percent.

The inflation figures were the latest in a series of data in recent weeks showing China's economy is slowing, which analysts said would allow the government to act more aggressively in trying to revive slowing growth.

"The softening CPI will give the central bank more room to stabilise the economy," Tang Jianwei, a Shanghai-based economist with the Bank of Communications, told AFP.

"Before the central bank had to balance between inflationary pressures and softening demand."

China's economy grew an annual 8.1 percent in the first quarter of 2012 -- its slowest pace in nearly three years. The government will release data for the second quarter on Friday.

The government early this year set an annual economic growth target of 7.5 percent, down from expansion of 9.2 percent last year and 10.4 percent in 2010.

But the central bank last week cut interest rates for the second time in a month, in a surprise move that analysts said indicated the economy was likely slowing more sharply than expected.

Chinese Premier Wen Jiabao then called on Sunday for stronger measures to spur economic growth, saying downward pressure was big.

"We must take further steps to increase the strength of pre-emptive fine-tuning," the official Xinhua news agency quoted Wen as saying.

Analysts attributed the fall in June inflation to an easing of food prices, a key component of CPI, which rose 3.8 percent in June, down from 6.4 percent in May, according to the statistics bureau.

They said inflation would likely fall further in the coming months, with deflation even a possibility.

China's producer price index, an advance indicator of inflation, fell 2.1 percent in June from the same month a year earlier, the statistics bureau reported Monday.

"Persistent deflation can be poisonous to the economy, which has already been manifested by continuous weakening of business profits," said Ren Xianfang, chief China economist for IHS Global Insight in Beijing.

The deflation threat is a marked turnaround after China's leaders had previously sought to keep inflation in check since the start of 2010, concerned that surging prices could spark social unrest.

Inflation peaked at 6.5 percent year-on-year in July last year, from a low of 1.5 percent in January, 2010.

Analysts expect China to further trim the reserve requirement ratio -- the amount of money banks must hold in reserve -- to inject more cash into the economy, as well as cut interest rates again.

"Inflation is falling fast and is likely to remain tamed for the rest of this year," said Sun Junwei, China economist for HSBC in Beijing.

"This leaves sufficient room for policy easing and Beijing's top leaders confirmed their willingness to do so," she said.

Chinese stocks closed down 2.37 percent on Monday, ignoring easing inflation, as investors focused on the indicators to be announced later this week likely to highlight the slowing economy, dealers said.

Loading...

Editor’s note:Yahoo Philippines encourages responsible comments that add dimension to the discussion. No bashing or hate speech, please. You can express your opinion without slamming others or making derogatory remarks.

  • N. Korea fires missiles in anger at South-US military drills
    N. Korea fires missiles in anger at South-US military drills

    North Korea fired two short-range ballistic missiles into the sea and vowed "merciless" retaliation Monday as the US and South Korea kicked off joint military drills denounced by Pyongyang as recklessly confrontational. The annual exercises always trigger a surge in military tensions and warlike rhetoric on the divided peninsula, and analysts saw the North's missile tests as a prelude to a concerted campaign of sabre-rattling. "If there is a particularly sharp escalation, we could see the …

  • Troops overrun BIFF bomb-making facility in Mamasapano
    Troops overrun BIFF bomb-making facility in Mamasapano

    Government troops captured Sunday a bomb and weapons factory of the Bangsamoro Islamic Freedom Fighters (BIFF) in Mamasapano, Maguindanao, the Armed Forces of the Philippines (AFP) announced yesterday. Col. Restituto Padilla, AFP spokesman, said the captured bomb and weapons factory is located inside an area controlled by radical Muslim cleric Ustadz Mohammad Ali Tambako at Barangay Dasikil in Mamasapano. …

  • No need for Revilla to visit son – prosecutors
    No need for Revilla to visit son – prosecutors

    Instead of filing an opposition, ombudsman prosecutors filed a manifestation yesterday expressing belief that there is no urgent need for Sen. Ramon “Bong” Revilla Jr. to visit his son at the Asian Hospital and Medical Center. “Based on the clinical abstract issued by the Asian Hospital on patient (Cavite) Vice-governor (Jolo) Revilla, which was submitted by accused Revilla in support of his Urgent Motion, Vice-governor Revilla is in stable condition and has stable vital signs, as of March 1, …

  • Couple married 67 years holds hands in final hours together
    Couple married 67 years holds hands in final hours together

    FRESNO, Calif. (AP) — After spending 67 years together as devoted husband and wife, there was no question how Floyd and Violet Hartwig would end their lives — together. …

  • How Islamic is Islamic State group? Not very, experts say
    How Islamic is Islamic State group? Not very, experts say

    CAIRO (AP) — Three British schoolgirls believed to have gone to Syria to become "jihadi" brides. Three young men charged in New York with plotting to join the Islamic State group and carry out attacks on American soil. A masked, knife-wielding militant from London who is the face of terror in videos showing Western hostages beheaded. …

  • 'Jihadi John' relatives under watch in Kuwait
    'Jihadi John' relatives under watch in Kuwait

    Kuwaiti authorities are closely monitoring several relatives of "Jihadi John" who live and work in the Gulf emirate where the Islamic State executioner was born, press reports said on Sunday. A number of relatives of Mohammed Emwazi, named as the militant who has beheaded at least five Western hostages, are working in Kuwait and like him hold British citizenship, Al-Qabas newspaper reported. "Security agencies have taken the necessary measures to monitor them round the clock," the paper said, …

  • Lawmakers split on tax exemption for Pacquiao
    Lawmakers split on tax exemption for Pacquiao

    Colleagues of boxing champion Manny Pacquiao at the House of Representatives backed yesterday a proposal to exempt his earnings from his May 2 fight with American Floyd Mayweather from income tax. Internal Revenue Commissioner Kim Henares has urged Pacquiao to promptly pay taxes on his May 2 earnings, which are projected to reach at least $120 million (more than P5.2 billion). …

  • Woman with slain Putin critic says she didn't see his killer
    Woman with slain Putin critic says she didn't see his killer

    MOSCOW (AP) — The 23-year-old Ukrainian model who was with slain opposition leader Boris Nemtsov tearfully recounted Monday their last dinner in a chic Red Square restaurant and their walk onto a nearby bridge — but said she did not see the gunman who pulled the trigger. …

POLL

Should Aquino be held accountable over the Mamasapano operations?

Loading...
Poll Choice Options