BEIJING (AFP) – Chinese inflation eased to a four-month low of 2.0 per cent in August, official data showed Thursday, with analysts saying the data could allow leaders to further ease monetary policy in the world’s number-two economy.
The National Bureau of Statistics also said in a statement that over the first eight months of the year the consumer price index – a main gauge of inflation – rose 2.2 per cent year on year.
The figures come at a time of concern over China’s economy as the effects of mini-stimulus measures this year to prop up slowing growth have waned and fears of a bust in the property sector intensify.
August’s results compare with an increase of 2.3 per cent in July and was also lower than the median estimate of 2.2 per cent in a survey of 15 economists by the Wall Street Journal. The government in March set a target of 3.5 per cent for the year.
Moderate inflation can be a boon to consumption as it encourages consumers to buy before prices go up, while falling prices encourage shoppers to delay purchases and companies to put off investment, both of which can weigh on growth.
Authorities have since April introduced measures to boost the economy, including tax breaks to small enterprises, targeted infrastructure outlays and incentives to encourage lending in rural areas and to small companies.
Despite the August drop, analysts said the outlook is for higher inflation in the coming months as utility prices and food costs rise.
Economist Hua Changchun and colleagues at Nomura said in a report that inflation is expected to remain moderate in September, “leaving room for further policy easing”.
It will then start to go up and “keep rising to an average of 3.0 per cent in 2015 on tight labour market conditions, the hog cycle and price liberalisation in the utility sector”, they wrote.
The data came on the heels of other indicators, including on manufacturing activity, showing continued weakness in the economy and fanning speculation that authorities will unveil new measures to boost growth.
The government on Monday said China’s trade surplus surged to a record $49.8 billion in August, even though export growth slowed, as imports saw a surprise fall.
Gross domestic product accelerated to a higher-than-expected 7.5 per cent in the second quarter from 7.4 per cent in the first three months of the year, which was the worst since a similar 7.4 per cent expansion in July-September 2012.
The government in March set its annual GDP growth target for 2014 at about 7.5 per cent, the same as last year.
In a speech Wednesday to a World Economic Forum meeting in China, Premier Li Keqiang hailed the government’s management of the economy and seemed satisfied with steps taken so far.
“We have managed to ensure steady growth and improve the quality of the Chinese economy,” he said.