Still, inflation remained well within the governments' comfort zone,
giving Beijing ample room to step up targeted policy support if
necessary to ward off any threat of a sharp economic growth
China's consumer price index (CPI) rose 2.5 percent in May from a
year earlier, quickening from a 1.8 percent rise in April. The
number slightly exceeded market expectations of 2.4 percent, data
from the National Bureau of Statistics showed on Tuesday.
Food prices rose 4.1 percent in May from a year earlier, quickening
from April's 2.3 percent rise, the data showed.
Month-on-month, consumer prices rose 0.1 percent versus a forecast
for a 0.1 percent fall.
"The recovery of pork prices, together with last year's low base,
helped the faster price rises," said Li Huiyong, an economist at
Shenyin & Wanguo Securities in Shanghai.
"The comfortable inflation figure will provide sufficient room for
the central bank to loosen its monetary policy in coming months to
shore up the economy."
The government has set a inflation target of around 3.5 percent this
year. China's central bank recently cut the level of deposits for
banks with sizeable lending to the farming sector and small firms -
the latest step to spur growth. [ID:nL4N0OQ2SZ] The government has
acted since April to steady growth through some focused measures,
characterizing it as policy fine-tuning.
Meanwhile, official manufacturing and service sector surveys showed
improvement in May, adding to hopes that the economic soft patch was
"As we are now beginning to see monthly data picking up, the logical
question is whether more easing will be needed," economists at HSBC
said in a research note.
"Given that underlying activities remain relatively sluggish and
funding costs (for companies) remain high, we think there is still a
lot more policy makers can do. In fact we expect policy makers to
stay in their current easing mode, and deliver more targeted and
incremental easing measures... "
FACTORY PRICE DEFLATION EASES
The producer price index (PPI) fell 1.4 percent in May from a year
earlier - the 27th consecutive month of decline – versus a 2 percent
fall in April and market expectations of a 1.5 percent drop.
"The PPI figure is in line with market consensus and provides more
evidence of stabilization in the economy," said You Hongye, an
analyst at Essence Securities in Beijing.
[to top of second column]
Yu Qiumei, a senior statistician at the National Bureau of
Statistics, said easing factory price deflation in May indicated
rising demand for industrial products.
Month-on-month, producer prices still fell 0.1 percent.
Chinese manufacturers have struggled to cope with profit-eating
price declines, adding to pressure on the government to take steps
to reduce financing burdens on companies.
China's exports gained steam in May thanks to firmer global demand,
data showed on Sunday, but an unexpected fall in imports signaled
weaker domestic demand that could continue to weigh on the world's
second-largest economy. [ID: nL4N0OP036]
Chinese leaders have ruled out any large stimulus as the country is
still nursing the hangover from the 4 trillion yuan ($640 billion)
stimulus implemented during the global crisis in 2008-09, which
resulted in piles of local government debt. The statistical bureau
is due to release data on industrial output, retail sales and
fixed-asset investment on Friday. New loan and money supply data
will be issued between June 10-15.
A Reuters poll found analysts expect annual economic growth to slow
to 7.3 percent in the second quarter from 7.4 percent in the
previous quarter, with full-year growth of 7.3 percent in 2014, the
weakest in 24 years and below the government target of 7.5 percent.
(Reporting by China Economics Team; Editing by Kim Coghill)
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