Econintersect: Inflation growth in China has been lowered by less demand pressure as the current economic recovery seems to be quite moderate compared to many recent expansions in the economy of the Middle Kingdom. The CPI grew by 2.1% year-over-year in March compared to February which saw a 3.2% rise. Food inflation, which was 6.0% in February declined to a relatively benign 2.7%. Month-over-month CPI fell by 0.9%. Producer price deflation, which GEI News has been following, deepened further in March to -1.9% year-over-year after February came in at -1.6%.
The following graph from Trading Economics shows the recent history of CPI in China. Ten of the last eleven months have seen year-over-year inflation at 3% or less. Eight of eleven are 2.2% or less. The average year-over-year inflation (CPI) for the past 12 months has been 2.4%.
The pervasive decline in PPI growth is seen in the following graph from Trading Economics, which is updated only through January 2013. PPI declined for 14 consecutive months from a high in July 2011 (down 10.3%), but then increased by 2.3% over the next five months to February 2013. The month-over month decline for March (-0.8%) is the first lower reading in six months.
Collected opinions from news sources include the following.
"We think the inflation outlook remains benign. If you look at the overall demand picture, China is recovering but the pace is still very gradual which means inflation is not a near-term concern," said Sun Junwei, China economist at HSBC in Beijing.
"Lower inflation will greatly ease investors' concerns that the policymakers would begin to tighten monetary conditions," Haibin Zhu, chief China economist at JP Morgan in Hong Kong, told Reuters.
“Overall, the recovery has been moderate which helps to rein in the inflation pressure from the demand side,” said Jian Chang, an economist with Barclays. “Recovery means a continued rise, so we have been saying it looks more like a growth stabilisation, a gradual and moderate improvement.”
- Chinese inflation slows sharply in March (Simon Rabinovich, Financial Times, 09 April 2013)
- China March CPI eases, factory deflation stubborn (Nick Edwards and Eric Meijer, Reuters, 08 April 2013)
- Statistical data (National Bureau of Statistics China)
- Trading Economics Charts