2.4% CPI rise shows slow growth

By Liang Fei Source:Global Times Published: 2013-5-10 1:03:01

An elderly woman looks at vegetables she just bought in a market in Shanghai on Thursday. Photo: AFP
An elderly woman looks at vegetables she just bought in a market in Shanghai on Thursday. Photo: AFP

 

China's consumer price index (CPI) rose 2.4 percent in April year-on-year, compared with a March reading of 2.1 percent, while the producer price index (PPI) declined further last month by showing a 2.6 percent year-on-year drop, the National Bureau of Statistics (NBS) said Thursday.

The April CPI was slightly higher than the market expectation of 2.3 percent. Rising vegetable prices, caused by bad weather, were the main factor pushing up the inflation, Yu Qiumei, a senior statistician at the NBS, said in a statement that came with the data.

Aside from February this year, when consumer goods prices were pushed up by the seasonal factors imposed by the Spring Festival, the CPI reading has remained under 3 percent since June 2012.

The central government set a goal to keep inflation around 3.5 percent in 2013.

Some investors have said that the government is very likely to cut the interest rate to boost the economic recovery, as inflation remains under control and other Asia-Pacific countries such as India, Australia and South Korea have also recently announced rate cuts.

However, Zhang Zhiwei, chief China economist at Nomura Securities, told the Global Times that the central government is not likely to alter its current monetary policies as the country may see higher inflationary pressure within the year.

"The CPI will continue to rise in the next few months — very likely to reach 3 percent in June. The inflation pressure has left little room for the government to ease monetary policy," Zhang said.

"The central bank should remain alert to the risks of high inflation," Zhang further noted, adding that the government will also continue to control credit growth.

Lian Ping, chief economist at the Bank of Communications, also said on his Sina Weibo account that a rate cut is not very likely as lowering the interest rate may further increase housing prices.

Lian also noted that the 7.7 percent GDP growth in the first quarter was well above the whole year target of 7.5 percent and the investment, consumption, as well as trade data are set to improve in the second quarter, thus "it seems there is no need to cut rates to boost the economy."

However, Zhang said that despite the rosy customs data released Wednesday, which said that China's export increased 14.7 percent year-on-year in April, the Chinese economy still faces tough times ahead.

Trade growth will be no more than 10 percent, and GDP growth will also slow down, with the whole year's growth  set to stand around 7.5 percent, he said.

Zuo Xiaolei, chief economist of Galaxy Securities, told the Global Times that the government should also remain alert to the risks of inflation triggered by excessive money issuance.

The NBS data also showed that China's April PPI, a major index to gauge the price of industrial products, has dropped to a six-month low by showing a 2.6 percent year-on-year drop — the 14th consecutive month of negative growth.

"The negative growth in PPI showed that the economy still lacks vitality …  and also reflected that industrial producers are suffering from severe overcapacity and weak demand, which reflects the need for reform of the industrial structure to gradually shift to the service sector," Zuo noted.

Baoshan Iron & Steel, China's largest steel maker, said Thursday it would cut its main steel product prices for June bookings amid the weak demand. The company's pricing usually sets the tone for the rest of the sector.

Earlier data showed that 34.9 percent of steel mills in China were suffering from losses in the first quarter due to severe overcapacity.

Zuo said that recent low prices in international commodities also partly contributed to the low PPI reading.


Posted in: Business, Economy

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