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HindustanTimes Sat,20 Sep 2014

World

China inflation up 2.3% on-year in July: govt
AFP
Beijing, August 09, 2014
First Published: 09:15 IST(9/8/2014)
Last Updated: 09:18 IST(9/8/2014)

China's annual inflation rose 2.3% in July, official data showed on Saturday, remaining stable and allowing authorities space to further stimulate growth in the world's second-largest economy if needed.

The country's consumer price index (CPI) -- a main gauge of inflation -- also rose by 2.3% in the first seven months of the year from the same period in 2013, the National Bureau of Statistics said in a statement.

The CPI had risen 2.3% in June, marking a slowdown from a four-month high of 2.5% in May.

July's result matched the median forecast of 2.3% in a Wall Street Journal survey of 15 economists and remained well below the 3.5% annual target set by the government in March.

The stable inflation figures came as China's economic growth has accelerated since authorities introduced measures to boost activity after gross domestic product (GDP) slowed at the beginning of 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 must tread carefully, however, as too much stimulus can cause economic growth to speed up to the point where inflation becomes a problem.

China's leaders want to change the country's growth model, with consumer spending to play a bigger role in driving economic growth instead of the large, state-supported investments that have traditionally propelled expansion.

Authorities have since April introduced steps to bolster the economy such as tax breaks for small enterprises, targeted infrastructure outlays and incentives to encourage lending in rural areas and to small companies.

China's GDP picked up to a higher-than-expected 7.5% in the second quarter from 7.4% during the first three months of the year, which was the worst since a similar 7.4% expansion in July-September 2012.

The government in March set its annual GDP growth target for 2014 at about 7.5%, the same as last year.

Overall food prices drove inflation in July, rising 3.6% from the same month last year, according to the NBS data. Fresh fruit prices surged 20.1%.

China's producer price index (PPI) -- a measure of costs for goods at the factory gate and a leading indicator of the trend for CPI -- improved to a decline of 0.9% in July, the NBS said in a separate statement.

The result compared with a decrease of 1.1% in June and remained the highest since a 0.7% decline in April 2012, according to previously published data. The last PPI increase was in January 2012, when it rose 0.7%.

The inflation data followed the government's announcement Friday that China's monthly trade surplus leaped to a record $47.3 billion in July, nearly tripling year-on-year as export growth accelerated while imports recorded an unexpected decline.


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