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Beijing, China / China (AFP) Aug 09, 2013
Chinese inflation held steady at 2.7 percent year-on-year in July, official data showed Friday, potentially giving the authorities some leeway for economic stimulus.
The consumer price index (CPI) figures from the National Bureau of Statistics (NBS) were marginally below market expectations of 2.8 percent, according to the median forecast in a survey of 14 economists by Dow Jones Newswires.
The CPI reading -- a main gauge of inflation -- has broadly eased since hitting 3.2 percent in February during the Chinese New Year holiday, although it rebounded in June to a four-month high.
The world's second-largest economy -- seen as a key driver of global growth -- expanded 7.8 percent in 2012, its slowest annual pace in 13 years. Growth slipped to 7.7 percent in the January-March period and slowed further to 7.5 percent in the second quarter.
Economists at Bank of America Merrill Lynch in Hong Kong said the inflation figures left room for the government to stimulate the economy if needed.
"Today's inflation data should be positive to markets as the muted inflation reading will provide necessary room for implementing a mini fiscal stimulus and avoiding monetary tightening," they wrote in a report.
Beijing has vowed to retool China's economic model to one focused on consumer spending rather than investment and exports as the key expansion driver. But analysts say it faces slower growth.
China's government has forecast gross domestic product will expand about 7.5 percent this year. It set its inflation target for 2013 at 3.5 percent, higher than last year's actual rate of 2.6 percent.
Inflation in July was driven by food prices, which contributed 1.61 percentage points of the overall gain, the NBS data showed.
Residential costs -- including rent, decoration and electricity charges -- were another main contributor, rising 2.8 percent year on year, according to the NBS.
For the first seven months of the year inflation came in at an annualised 2.4 percent, it added.
China's producer price index (PPI), another key indicator that measures the cost of goods at the factory gate, declined 2.3 percent year-on-year in July, the NBS said in a separate statement, suggesting domestic demand remained weak.
Economist Zhang Zhiwei of Nomura International in Hong Kong said in a report that CPI should "remain stable at around 2.7 percent" during the current third quarter.
The measure was then likely to increase above three percent in the final three months of the year "due to a seasonal pickup in prices", he added.
The inflation figures came after official data last week showed the manufacturing sector remained in expansion mode in July and robust trade figures were released Thursday. Both were taken as possible signs of stability.
Exports and imports, which had contracted in June, rebounded last month, growing 5.1 percent and 10.9 percent year-on-year respectively, according to Customs.
Two-way trade rose 7.8 percent year-on-year, slightly lower than the government's eight percent target for this year but "showing a stabilising and recovering trend", Customs said.
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