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Economic figures for the third quarter indicate a further slowdown (3)

By Zhou Xiaoyan (Beijing Review)

08:18, October 22, 2012

Mild inflation

Inflation in the world's second largest economy saw a mild deceleration in September.

The Consumer Price Index (CPI), the main gauge of inflation, grew 1.9 percent year on year in September, said the NBS on October 15. The CPI grew 2 percent in August and hit a two-year low of 1.8 percent in July.

Food prices, which account for nearly one third of China's CPI, rose 2.5 percent in September from one year earlier. Slowing growth in food prices and fewer carry-over effects from last year contributed to the slight drop in inflation, analysts said.

China's producer price index (PPI), which measures inflation at the wholesale level, dropped 3.6 percent year on year in September. It marked the seventh straight month of decline since PPI fell in March for the first time since December 2009.

Xu Lianzhong, an economist from the price monitoring center of the NDRC, said the data was quite normal and within expectations, signaling that the Chinese economy had started to stabilize.

The second half of this year has seen low inflation. Conditions are ripe for an economic recovery in the last quarter, supported by the easing of fiscal and monetary policies since the second quarter, according to economists.

"The data indicate that inflation has been significantly weakened in China. Meanwhile, domestic demand still remains low, which means that further policy loosening is needed in the Chinese economy," said Liu Ligang, an economist with ANZ National Bank Ltd.

According to the NBS, the nation's CPI grew by an average of 2.8 percent year on year in the first nine months. Liu said he believes the country is poised to meet its target of keeping inflation under 4 percent for the year.

Liu said that as inflation lessens and the economy faces downward pressure, cutting the reserve requirement ratio of banks is still needed to spur the economy for the rest of the year.

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