Beijing - Chinese inflation hit a
two-and-a-half-year low in July, official data showed on Thursday,
giving the government further policy leeway to boost weakening
growth.
The country's consumer price index
(CPI) rose 1.8% year-on-year (y/y) last month, the National Bureau of
Statistics said, the fourth straight month of y/y easing and the
lowest level since January 2010.
The slowdown potentially gives
authorities more ammunition to light a fire under the world's
second-largest economy, which grew 7.6% in the second quarter for its
worst performance since the height of the global economic crisis in
2008-2009.
Authorities this year have taken
measures including the rare step of slashing interest rates twice in
quick succession while also lowering requirements for how much money
banks must keep in reserve.
Chinese leaders, including Premier Wen
Jiabao, have expressed concern over the weakness in the economy and
have hinted that the government may need to take further action to
bolster growth.
Sun Junwei, China economist at HSBC in
Beijing, said the figure was in line with expectations and confirmed
that inflation overall is trending downward.
"In general, China's inflation
will likely be moderate and controllable in the future, which offers
room for China to further loosen its (monetary) policy," she
said.
Sun added that if other economic data
due out later on Thursday comes in worse than expected there could be
a further cut in interest rates or bank reserve requirement ratios in
August.
China is scheduled to announce July
figures in industrial production, fixed asset investment and retail
sales later Thursday.
Helping suppress the overall consumer
price index was a decline of 0.9% in prices for transportation and
telecommunications, according to the data.
Inflation for the first seven months of
2012, meanwhile, was 3.1%, the bureau said.
"Inflation continues to peel off
rapidly, highlighting an output gap that the government is trying to
plug with rising state investment," economists at IHS Global
Insight said in a report after the release of the July data.
Producer price inflation (PPI), a
leading indicator, declined 2.9% in July from the same month last
year for the fifth straight month of contraction.
Producer prices "continue to
highlight the severe deflationary pressure rippling across the
country", IHS Global Insight said, noting that "deflation,
not inflation, is the greatest short-term threat to the Chinese
economy".
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