China says inflation eases slightly in April

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China says inflation eases slightly in April

China said Friday that inflation slowed in April, easing worries of resurgent prices and giving room to loosen monetary policy to boost slowing growth in the world's second largest economy.

Chinese people Women shop for fruit at a stall in Shanghai on May 11, 2012. China said Friday that inflation slowed in April, easing worries of resurgent prices and giving room to loosen monetary policy to boost slowing growth in the world's second largest economy. Photo: AFP

China said Friday that inflation slowed in April, easing worries of resurgent prices and giving room to loosen monetary policy to boost slowing growth in the world's second largest economy.

The country's consumer price index (CPI) rose by 3.4 percent year on year in April compared with 3.6 percent in March, the National Bureau of Statistics said, a slowdown analysts said was driven by moderating food prices.

"Inflation is on a downward trend," Ren Xianfang, an economist at IHS Global Insight in Beijing, told AFP.

"As to food prices, which have a big impact on CPI, supply is quite sufficient right now. So overall, we can say that inflationary pressure this year is not big," she said.

The April figure was exactly in line with market expectations, according to a poll of 15 economists by Dow Jones Newswires.

The key food component of CPI rose 7.0 percent year on year in April – contributing more than two percentage points to overall inflation – but eased from a 7.5 percent rise in March, the bureau said.

China has set itself the target of keeping annual inflation within four percent this year, fearing that surging prices carry the potential to cause social unrest as citizens grumble about paying more.

But easing inflation should give China more room to ease monetary policy, including cuts in reserves for banks, to combat slower economic growth.

"The top issue for China's economy is not inflation, but rather how to maintain economic growth," Liao Qun, China economist for Citic Bank International in Hong Kong, told AFP.

"If economic data... turn out to be weaker than expected, it will likely prompt China to take further easing measures through cuts in banks' reserve requirements," he said.

China's economy grew 8.1 percent in the first quarter of 2012, its slowest pace in nearly three years.

Beijing has already cut bank reserve requirements twice since December as policymakers aim to boost lending to spur growth. Analysts widely expect the government to further loosen monetary policy as it looks to boost growth.

The producer price index (PPI), which measures the cost of goods at the farm and factory gate and is an indicator of future consumer prices, slipped 0.7 percent in April from a year earlier, a sharper fall than the 0.3 percent in March.

Analysts said weakness in producer prices could become one of the main factors that prompt the government to adopt further easing measures.

"The recovery is coming, but don't expect a problem-free growth spurt," IHS Global Insight said in a research note.

Chinese shares were up slightly in late morning trade after the inflation figure was released, erasing earlier losses. The Shanghai Composite Index rose 0.17 percent to 2,414.40 points.

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