China - China inflation slows to nearly three-year low

BEIJING: China's inflation rate slipped to a nearly three-year low in October, data showed Friday, leaving the authorities with room to take more steps to boost the recovery in the world's second-largest economy.

The country's consumer price index rose 1.7 per cent year-on-year last month, the National Bureau of Statistics announced, compared with an increase of 1.9 per cent in September.

The figure marked the sixth month out of the last seven that consumer inflation has slowed and marked the lowest since 1.5 per cent recorded in January 2010.

The result compares with a median 1.9 per cent forecast for October in a survey of 12 economists by Dow Jones Newswires.

The data comes as China's economy grew 7.4 per cent in the three months through the end of September for its weakest performance in more than three years and the seventh straight quarter of slowing expansion.

Still, recent statistics, including manufacturing, trade and industrial output, have led to optimism among economists that the worst of China's slowdown may be over.

Sun Junwei, Beijing-based China economist for British bank HSBC, said that Friday's data shows "inflation is well-behaved and overall inflationary risk may remain low in the short term.

"This will give room for the central bank to maintain relatively loose monetary and fiscal policies to strengthen the initial economic recovery."

Chinese authorities have taken steps to boost economic growth by cutting interest rates twice in less than a month earlier this year and have also reduced the amount of funds banks must keep in reserve three times since December last year in bids to encourage lending.

Producer prices -- which measure the costs of goods as they leave factories, and are seen as a leading indicator of price trends -- remained in deflation, declining 2.8 per cent in October, NBS data showed.

While that marked the eighth straight month of year-on-year contraction, it came at a weaker pace. Producer prices had fallen 3.6 per cent in September.

IHS Global Insight economists Ren Xianfang and Alistair Thornton said that the improved producer price data could be taken as a positive sign.

"There are inklings of demand resurgence in PPI," they wrote in a commentary, with the month-on-month figure rising 0.2 per cent and "escaping deflation for the first time since April".

"It will be a few months before we see a return to PPI inflation, though -- industrial profitability is still suffering, and many upstream sectors are still plagued with overcapacity and inventory build-up."

China is scheduled to announce industrial production, retail sales and fixed asset investment figures for October later Friday.

- AFP/ck

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