Chinese CPI rises 2.4 per cent in April

Rise in inflation mean no changes in policy and interest rates in the near future.

New Statesman
A vegetable market in Shanghai. Credit: Getty Images.

The Chinese consumer price index (CPI) grew 2.4 per cent in April 2013 year-on-year and rebounded from a decline of 2.1 per cent in March.

The increase was primarily due to a rise in the cost of vegetables, according to the National Bureau of Statistics. However, core inflation has so far remained subdued.

During the month, non-food elements in CPI grew by 1.6 per cent year-on-year, lower than their average rise in the first quarter of 2013.

The producer price index declined 2.6 per cent year-on-year in April, which reflects fall in global commodity prices and unused factory capacity.

Lu Ting, an economist with Bank of America Merrill Lynch, said: “China’s short-term economic growth momentum seems weaker than expected, reducing the risk of sharp price rebound and [helping] lower inflation expectations.”

Ting added that the one upside from weak growth and subdued inflation is that it creates additional room for the government to keep monetary policy loose and to use fiscal policy in support of the economy.

Zhang Zhiwei, an economist with Nomura, told the Financial Times that the increase in consumer inflation, even if gradual, was already beginning to limit Beijing’s options. Zhiwei said: “The rebound of consumer price inflation makes policy easing unlikely. It reduces the possibility of an interest-rate cut.”

The Chinese economy, which grew by 7.8 per cent in 2012, is forecast to post stronger growth in 2013. However, there are concerns that an unexpected slowdown in the first quarter, despite remarkably strong credit issuance, may have carried over into the start of the second quarter, reported FT.

Meanwhile, the People's Bank of China has said that investors are concerned that a surge in credit growth in the first quarter will fuel price pressures later this year.