China February inflation tame, room for policy easing

Sat Mar 8, 2014 10:59pm EST
 
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BEIJING (Reuters) - China's consumer prices rose at their slowest rate in 13 months in February as pork prices fell by their most in over a year, a sign that slowing growth rather than rising prices poses a bigger risk to the world's second-biggest economy.

The consumer price index rose 2 percent in February from a year earlier, the National Bureau of Statistics said on Sunday, exactly in line with market expectations. Pork prices fell 9 percent.

And in an indication that China's wobbly economy is fighting substantial slack, producer prices fell for the 24th consecutive month by dropping 2 percent, slightly above forecasts for a 1.9 percent drop.

The tepid price data could fuel investor worries about the health of China's economy, which drew new concerns this week after figures showed export growth slumped by nearly a fifth last month.

Some analysts say at least with inflation clearly not a threat, China will have the room to loosen policies to bolster the economy if it needs to.

"Low inflation could be good news for markets as monetary tightening is definitely not justified," said Ting Lu, an economist at Bank of America-Merrill Lynch.

"Low inflation gives the People's Bank of China more room to ease the liquidity situation and tame rising rates."

After 30 years of stellar annual growth rates that averaged at least 10 percent, China's maturing economy is shifting gears and moving into slower but high-quality growth, away from its previous export- and investment-driven model.

But the transition has not been easy. Much of the data out this year showed the powerful Chinese growth engine has had a difficult start as factories fought multi-month low business orders and export growth whipsawed, unnerving global investors.   Continued...

 
A vegetable vendor waits for customers at a market in Beijing February 14, 2014. REUTERS/Kim Kyung-Hoon