China's inflation rate slows slightly to 3.4 pct

AP News
Posted: May 11, 2012 1:00 AM
China's inflation rate slows slightly to 3.4 pct

China's inflation rate slowed slightly to 3.4 percent in April, down from 3.6 percent a month earlier, giving the government greater leeway to ease policy to boost the economy.

The National Bureau of Statistics announced the figure Friday, which comes after China's economy grew in the first quarter by its slowest pace since 2009.

The figure also comes a day after China announced that its trade surplus widened in April as imports barely budged, sharpening fears that the world's second-biggest economy is not doing enough to stimulate domestic demand and counter a slowdown.

China grew by a still-robust 8.1 percent in the three months ending in March, down from the previous quarter's 8.9 percent, but above the government's 7.5 percent target for the year.

Growth has fallen steadily since 2010 as a slump in global demand battered exporters and Beijing tightened lending and investment curbs to cool an overheated economy and surging inflation.

April's moderation in the consumer price index was aided by an easing in costs for food and housing. Food price inflation slipped to 7 percent from 7.5 percent in March.

Meanwhile, the producer price index of costs for manufacturers, fell 0.7 percent. That largely resulted from falling commodity prices, but could ease future price pressures.

But wages and rental prices are rising in the longer term, noted ANZ in a commentary.

"We remain cautious on China's inflation outlook. Price reforms will continue to add pressure to China's structural inflation," it said, adding that "for the foreseeable future we expect to see significant increases in utility prices such as water, electricity, and fuel."

So far, data for April have not yielded the anticipated signs of a "bottoming out" of the economy, though economists expect to see that soon.

"The trough is likely by midyear," said Alaistair Chan, an economist for Moody's Analytics.

Already, there are signs that China's slowdown is hurting demand for oil, industrial components and consumer goods at a time when U.S. and European growth are weak.

Last year's unexpectedly steep plunge in demand for China's exports due to U.S. and European economic woes prompted communist leaders to reverse course and ease controls on bank lending to help struggling manufacturers.

Further easing measures are expected, with most analysts predicting the central bank will soon reduce reserve requirements for commercial banks.