China inflation up 2.3% year-on-year in July: gov’t

By Kelly Olsen ,AFP

BEIJING — China’s annual inflation rose 2.3 percent in July, official data showed Saturday, remaining stable and allowing authorities space to further stimulate growth in the world’s second-largest economy if needed. The country’s consumer price index (CPI) — a main gauge of inflation — also rose by 2.3 percent in the first seven months of the year from the same period in 2013, the National Bureau of Statistics said in a statement. The CPI had risen 2.3 percent in June, marking a slowdown from a four-month high of 2.5 percent in May. July’s result matched the median forecast of 2.3 percent in a Wall Street Journal survey of 15 economists and remained well below the 3.5-percent annual target set by the government in March. The stable inflation figures came as China’s economic growth has accelerated since authorities introduced measures to boost activity after gross domestic product (GDP) slowed at the beginning of the year. Moderate inflation can be a boon to consumption as it encourages shoppers to buy before prices go up, while falling prices encourage them to delay purchases and companies to put off investment, both of which can weigh on growth. Authorities must tread carefully, however, as too much stimulus can cause economic growth to heat up to the point where rising inflation becomes a problem. “In general, China’s inflation outlook remains mild,” ANZ Bank economists Liu Li-Gang and Zhou Hao said in a research note published after the data.

“However, the deflation risks may even rise in the foreseeable future if the growth momentum weakens again,” they added, cautioning that the threat of falling costs remains, citing a gauge of online consumer prices that has been negative on a year-on-year basis for more than two years. “Against this backdrop, the central bank should maintain an accommodative bias in the monetary policy stance,” they added.