China Focus: Inflation rises to 2.4 pct in April

BEIJING, May 9 (Xinhua) -- China's consumer inflation slightly accelerated in April, but still within a mild range that leaves room for policymakers to fine-tune policies to support the tepid economic recovery, official data showed Thursday.

China's consumer price index (CPI), a main gauge of inflation, grew 2.4 percent year on year in April, up from 2.1 percent in March but well below the year's control target of 3.5 percent, according to the National Bureau of Statistics (NBS).

The rise is largely in line with the market forecast of around 2.3 percent.

The NBS attributed the gain mainly to an unusual increase in vegetable prices during that month as low temperatures and scarce rainfalls disrupted supplies.

A consumer selects pork at a food market in Dehui City, northeast China's Jilin Province, May 9, 2013. China's consumer price index (CPI), a main gauge of inflation, grew 2.4 percent year on year in April, up from 2.1 percent in March, the National Bureau of Statistics (NBS) said Thursday. The NBS attributed the gain mainly to an unusual increase in vegetable prices during that month as low temperatures and scarce rainfalls disrupted supplies. (Xinhua/Lin Hong)

In April, food prices, which account for nearly one-third of weighting in China's CPI, increased 4 percent year on year, with the prices of vegetables rising 5.9 percent, NBS data showed.

On a monthly basis, consumer prices in April edged up 0.2 percent.

Liu Ligang, chief economist with Greater China at ANZ Bank, expects the CPI growth in May to stay below 3 percent and gradually pick up pace in the latter half of the year due to a low year-ago comparison base.

"But given the subdued momentum in the economic recovery, the CPI will not see rapid gains this year," he added.

The country's economic growth unexpectedly dipped to 7.7 percent in the first quarter, falling short of market expectations and suggesting a continued tepid economic rebound for the world's second-largest economy.

While analysts largely believe inflationary pressures are not a cause for concern in the short term, Thursday's data regarding prices at factory gates demanded more market attention.

China's producer price index (PPI), which measures wholesale inflation, fell 2.6 percent year on year in April, marking the 14th straight month of decline and the steepest drop in six months that pointed to continued weak market demand.

Official data earlier this month showed China's Purchasing Managers' Index for the manufacturing sector fell to 50.6 percent in April from 50.9 percent in March. The sub-index for new orders edged down 0.6 percentage points from the previous month to 51.7 percent.

Given the weak growth activity and relatively subdued inflation, China may bend towards looser monetary policies to keep liquidity flowing to nurture the recovery, while proceeding with structural reforms to sustain long-term growth, Liu said.

The possibility of an interest rate cut within the year is on the rise, he projected.

But Lian Ping, an economist with the Bank of Communications, held that such a radical move is unlikely, as the current liquidity is ample enough to support growth and further significant easings may once again fan up property prices.

Besides, the central bank's sale of 10 billion yuan (1.6 billion U.S. dollars) of three-month bills on Thursday dampened the possibility of a rate cut, he noted.

Lu Zhengwei, chief economist at the China Industrial Bank, said instead of relying on reducing the interest rate or banks' reserve requirement ratio, the central bank will continue to adjust liquidity via open market operations.

We Recommend:
Top 10 biggest Chinese companies 2013	Housewives' gold rush keeps price from falling	Models pose for Fuzhou Auto Fair
Antique auto show kicks off in New York	China's CAS to buy 60 Airbus planes	2013 Tianjin auto show kicks off