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Inflation eases for 2nd month in row

Xin Zhiming/Li Xiang
Updated: May 11,2018 8:57 AM     China Daily

China’s consumer inflation eased for a second straight month, dragged down by lower food prices. Analysts said consumer inflation would continue to be stable this year despite the recent spike in international oil prices.

The consumer price index increased by 1.8 percent in April from a year ago, compared with a 2.1 percent year-on-year gain in March, the National Bureau of Statistics said on May 10.

Food prices dropped 1.9 percent in April month-on-month, making it the main contributor to easing consumer inflation last month, said Sheng Guoqing, a senior NBS statistician, in a statement on the bureau’s website. Pork prices dropped by a sharp 16.1 percent in April compared with a year ago.

Analysts said China’s consumer inflation would remain mild this year although international oil prices have risen sharply, which will have a spillover effect on domestic prices.

International crude prices topped three-year highs following the news that US President Donald Trump decided to pull out of the Iran nuclear deal. Investors expected the development would add to the complexity of the geopolitical situation in the Middle East and curtail oil supplies.

Cao Heping, an economist at the Peking University School of Economics, was quoted by Chinese media as saying that given China’s prudent and neutral monetary policy stance and overall domestic supply and demand would remain balanced and consumer prices may maintain the trend of stable and mild rises.

Sun Fu, an analyst at Zhejiang Securities, said pork prices remain in a downward cycle and international oil prices have yet to show a trend of continual sharp rises in the second quarter. In this scenario, China’s inflation level would remain “controllable”, he was quoted as saying by Securities Daily.

China set a consumer inflation control target of under about 3 percent this year.

The producer price index, which gauges factory gate prices, rose by 3.4 percent in April from a year earlier, ending a five-consecutive-month deceleration cycle, up from 3.1 percent in March.

Industries, such as petroleum and natural gas exploitation, metal smelting, coal processing and chemicals, are the main contributors to factory gate price increases in April, said Sheng of the NBS.

“After a weak March ..., we think economic activity in April and May is likely to stay firm,” said a research note by financial group UBS before the release of the NBS data on May 10.

“Policy support for rental market development may only provide limited lift for the downward property adjustments this year. On the other hand, manufacturing investment revival, resilient consumption and strong external demand should offer some cushion,” it said.

Overall, China’s GDP growth may ease this year as property and infrastructure activities weaken, the report said, warning that the ongoing China-US trade frictions may bring some headwinds.