China's consumer price index (CPI), a main gauge of inflation, slowed from the growth registered in May and grew 1.9 percent year on year in June. The CPI grew 2.1 percent in the first half of 2016, while the annual target was set around 3 percent.Analysts believe that current relatively stable inflation leaves space to the implementation of monetary policy, and the efforts in easing policies might be larger than expected.
China's CPI grew 1.9 percent year on year in June, the National Bureau of Statistics (NBS) announced Sunday. The June data slowed from a 2-percent growth registered in May and dropped for the second consecutive month.
NBS statistician Yu Qiumei attributed the moderated inflation mostly to eased food prices. Food prices in June saw a month-on-month decline of 1.4 percent, contributing 0.29 percentage points to the month-on-month decline of CPI.
The CPI totally surged 2.1 percent in the first half and ran steadily. The lowest reading of 1.8 percent was recorded in January, while the highest reading of 2.3 percent was maintained in February, March and April.
Liu Xuezhi, a senior analyst at Bank of Communications, indicated that the CPI pressure in the second half will be smaller than it was in the first half. The total CPI surge throughout 2016 will be around 2 percent.
The data announced yesterday also shows that China's producer price index (PPI), which measures costs for goods at the factory gate, slid 2.6 percent year on year in June. The drop of PPI in the first half kept narrowing, and the PPI dropped 3.9 percent year on year in the first half of 2016.
Though the year-on-year drop narrowed, June's PPI edged down on a month-on-month basis. It is resulted from the month-on-month price drop of some industrial products. It shows that de-capacity is encountered with headwinds.
Data shows that despite the month-on-month surge in May, the price of the smelting and plating of ferrous metal, the smelting and plating of non-ferrous metals as well as chemical raw material and chemical products dropped by 5.1 percent, 0.2 percent and 0.3 percent, respectively, in June. The month-on-month price hike of coal mining and washing industry also narrowed 0.9 percentage points to 0.9 percent.
In the eyes of Zhang, the month-on-month drop of PPI has something to do with China's economic slowdown.
Therefore, Zhang indicated during the interview that current relatively stable inflation leaves space to the implementation of monetary policy, the government should intensify fiscal efforts to boost the demand of real economy in the second half. But the support of relatively easing monetary policies is needed amid the process. At present, the delayed interest rates hike by the Fed and the mild inflation in China create sound conditions for it.
The research team at Minsheng Securities also believes that moderated inflation might bring forth the launch of easing policies, and the government’s efforts in easing policies might strengthen.
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