Daily Times

BEIJING: China’s consumer price growth slowed in June, the National Bureau of Statistics (NBS) said Sunday, giving the central government room for further monetary stimulus to stabilise economic growth.

The consumer price index (CPI) – a main gauge of inflation – rose 1.9 percent on-year, the National Bureau of Statistics said, lower than May’s 2.0 per cent but higher than the 1.8 median forecast in a Bloomberg News survey of economists.

Moderate inflation can be a boon to consumption as it pushes buyers to act before prices go up, while falling prices encourage shoppers to delay purchases and companies to put off investment, both of which can hurt growth.

Food prices fell 1.4 per cent month-on-month, the data showed, weighing down the overall inflation figures.

The world’s second largest economy expanded last year at its slowest rate in a quarter of a century as Beijing strives to effect a difficult transition in its growth model away from reliance on exports and fixed-asset investment towards one driven by consumers.

The producer price index (PPI), which measures the cost of goods at the factory gate, fell 2.6 per cent year-on-year last month, narrower than the 2.8 per cent decline in May, as deflation pressures eased due to a rebound in some commodity prices.

Protracted declines in PPI bode ill for industrial prospects, but narrowing declines in the last two months have fuelled hopes the Chinese economy could be reaching the bottom of a painful slowdown.

Looking ahead, analysts said widespread flooding due to summer heavy rains could put short-term pressure on China’s industrial output.

Construction is likely to spike once the floods subside, but in the short term industrial production growth will see “negative shocks”, Zhang Yao of Nomura said in a note.

Food prices could spike due to the destruction of crops and livestock by floods, said Chang Liu of Capital Economics, increasing the risks of a rise in consumer inflation in the second half of the year.