China's inflation accelerates to 2.4% on year in April

BEIJING (AFP) - Inflation in China accelerated to 2.4 per cent year-on-year in April, official data showed Thursday, above market expectations, but analysts said counter-measures were unlikely due to weak economic momentum.

Month on month, the consumer price index (CPI) – a main gauge of inflation – increased by 0.2 per cent in April, reversing a decrease of 0.9 per cent in March, the National Bureau of Statistics (NBS) said in a statement.

The annual figure was higher than the median forecast for a 2.2 per cent  gain in a poll of 13 economists by Dow Jones Newswires. Authorities said higher vegetable prices in the world’s second-biggest economy were responsible for the rise, an increase from 2.1 per cent in March.

“The rather large increase in vegetable prices was the main driver of the rise in CPI,” said Yu Qiumei, a senior analyst at the NBS, in a statement, adding that unusually cold temperatures and low rainfall across the country were to blame.

China has set its inflation target for this year at 3.5 per cent, higher than the actual inflation rate for 2012 of 2.6 per cent. Economists said inflation was expected to remain mild in the coming months, partly due to the sluggish growth momentum.

“Overall inflationary pressures this year should remain abated given that the economy is unlikely to see a strong pick-up in the next few quarters,” said ANZ Bank analysts Liu Ligang and Zhou Hao in a research note.

China grew at its slowest pace in 13 years in 2012, with gross domestic product expanding 7.8 per cent in the face of weakness at home and in key overseas markets.

There was a rebound to 7.9 per cent in the final quarter of 2012, raising hopes of recovery, but in the first three months of this year growth slowed to 7.7 per cent.

Authorities were likely to keep policy relatively loose to boost economic growth, which is all important for job creation and social stability, analysts said.

“Chinese policymakers have the room to maintain relatively accommodative fiscal and monetary policies on weak growth and low inflation,” said Lu Ting and Zhi Xiaojia, economists with Bank of America Merrill Lynch, in a report.

But major stimulus measures were rather unlikely unless economic growth slid much further, they added.

“We expect no additional stimulus as growth could naturally recover a bit and policymakers can tolerate a lower growth.”

Chinese leaders have said expansion will probably slow from the annual near-double-digit increases of recent decades in the next stage of the country’s development, partly due to efforts to transform its economic model.

They have vowed to retool the economy to emphasise consumer demand as the key growth driver, rather than investment and exports.

ANZ Bank’s Liu and Zhou said tepid inflation provided conditions for Beijing to step up reforms in areas including hiking resources prices, interest rate liberalisation, tax cuts and residency controls.

In the first four months of the year, CPI increased by 2.4 per cent year-on-year, the NBS said, unchanged from the reading for the first quarter.

Comments