China inflation up 1.9 per cent in June, slowest in 6 months

BEIJING, China – Chinese government data showed consumer prices in June rose at the slowest pace in six months, suggesting the world’s second-largest economy is still experiencing weak consumer demand amid a broad downturn.

The National Bureau of Statistics said Sunday China’s consumer price index (CPI) rose 1.9 per cent in June from a year earlier.

Although the rate was slightly above analyst expectations, it remained far below the 3 per cent target set by Chinese officials for 2016 and offers the central bank flexibility to enact a new round of monetary stimulus that some economists have called for.

The People’s Bank of China has kept interest rates at record lows since October, when it also removed a deposit-rate ceiling for banks and lowered their reserve requirements to stimulate lending and growth.

Tame inflation rates could spur the PBOC to make additional moves this year to meet Chinese leaders’ 2016 GDP growth target of 6.5 per cent to 7 per cent, the lowest rate in a quarter century. China reported first-quarter GDP growth of 6.7 per cent and will release its second-quarter figure on July 15.

Researchers at the National Development and Reform Commission, the economic planning body, wrote in a Shanghai Securities News op-ed last week that another interest rate cut “cannot be ruled out” if second-quarter GDP data falls below market expectations.

The statistics bureau also said Sunday that the producer price index, another inflation metric that gauges prices that businesses receive for goods and services, fell 2.6 per cent from a year prior. The rate of decline, however, continued to decelerate from previous months.

The official Xinhua News Agency quoted President Xi Jinping as saying on Friday that the economy is performing in line with expectations and China will persist with “proactive fiscal policy and prudent monetary policy” while pursuing structural reforms.