Data indicate decline leveling out

Modest rise in consumer prices and moderating trend in factory-gate producer prices provide hope for economic cycle

China's consumer prices remained stable in April as declines in producer prices eased further, raising hopes that the economy could be bottoming out from a downward growth cycle, analysts say.

The consumer price index rose by 2.3 percent in April from a year earlier, but was unchanged from March.

Declines in the producer price index, a key gauge that measures prices of goods at the factory gate, eased to 3.4 percent last month from a year earlier, compared with a fall of 4.3 percent in March.

In month-on-month terms, the PPI increased by 0.7 percent, the second consecutive rise, the National Bureau of Statistics said on May 10.

Niu Li, director of macroeconomics at the State Information Center, attributed the "significant moderation" in producer prices to rising commodity prices since February and a higher level of production driven by increased infrastructure investment and recovery in the construction sector.

"The month-on-month spike in the PPI brings some hope that deflationary risks are easing, and is a good sign that the economy is continuing to recover," Niu says.

Lian Ping, chief economist at Bank of Communications, says raw material prices at the factory gate continued to edge up last month, pointing to a possible return of producer inflation toward the end of the year.

However, Zhou Hao, an economist at Commerzbank in Singapore, says the month-on-month PPI increase may be linked to speculation driven by a short-term rise in raw materials prices.

Niu says the stable CPI reading means that inflation remained below 3 percent, leaving ample room for policymakers to continue easy-money policies, if necessary, in the face of weak demand.

On May 9, People's Daily quoted an "authoritative figure" as saying that China's economic growth will follow an L-shaped path as downward pressures continue to be felt.

The source warned that more targeted measures need to be taken to tackle emerging problems, such as soaring real estate prices, overcapacity, an increase in nonperforming loans, local government debt and financial market risks.

China's economy expanded by 6.7 percent in the first quarter, the slowest quarterly pace since 2009.

wangyanfei@chinadaily.com.cn

(China Daily European Weekly 05/13/2016 page24)