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China inflation at 22-month low
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China inflation at 22-month low
AFP - Friday, December 12
BEIJING (AFP) - - China's inflation rate slowed to a 22-month low in November, the government said Thursday, as analysts warned prices may soon start to fall and flagged further economic pump-priming measures.
The consumer price index (CPI) increased 2.4 percent in November from the same month a year earlier, an abrupt drop from a figure of four percent in October, the National Bureau of Statistics said.
China began the year worried about soaring inflation due to economic overheating, but analysts said the latest data raised the spectre of deflation as the impact of the global slowdown worsens in China.
"As the global turmoil continues to deteriorate, weighing on commodity prices and also curbing demand-driven inflationary pressures, deflation in China appears imminent," said Sherman Chan, a Sydney-based economist with Moody's Economy.com.
The latest figures marked a continued price softening after CPI hit a 12-year high of 8.7 percent in February.
Prices of food products, a key consumer concern in China, were up just 5.9 percent in November, far less than the 20.4 percent rate over the first half of the year.
Prices of non-food items, meanwhile, increased a paltry 0.6 percent, with service industry costs gaining a mere 0.3 percent and general consumer goods increasing 3.1 percent.
Ma Qing, an analyst with research firm CEB Monitor Group in Beijing, said inflation in China would likely be a negative 1.5 percent in the coming months.
"We think deflation is very likely to begin... in February or March and stay for one to two quarters," he said.
China last month announced a 586-billion-dollar stimulus package aimed at boosting domestic demand, hoping to shore up the trade-dependent economy as overseas demand for Chinese exports shrivels.
But the inflation data indicated domestic consumption was already flagging, Ma said.
"(The easing of) CPI was led by increases in supply in the past but now it is probably the result of insufficient overall demand, mainly due to the export falls," he said.
Economist Jiang Chao of Guotai Jun'an Securities in Shanghai predicted four more successive interest rate cuts by the central bank over the next 12 months, after it has already slashed rates four times since September.
Other observers said authorities were expected to go further.
"The government is expected to announce a second fiscal stimulus package in early 2009, in an attempt to arrest further deterioration of economic conditions," Chan of Moody's Economy.com said.
Official Chinese media have already reported that the second package could aim to boost household consumption by providing wider insurance coverage and higher salaries, as well as pump billions of dollars into the stock market.
The government had feverishly pulled a range of policy levers throughout 2008 to try to curb inflation, amid concerns it could give rise to social unrest.
But Beijing reversed course in recent months, including by slashing interest rates, as the global slowdown hit home.
The inflation data was just the latest indication of trouble for the world's fourth largest economy, which has slowed much more sharply than estimated during the initial stages of the global crisis.
China's economy expanded 9.0 percent in the third quarter, its slowest pace in five years, and the expansion in the final quarter is widely expected to be much lower.
On Wednesday, the government announced that exports had declined 2.2 percent to 115 billion dollars in November from the previous year, the first such decline in more than seven years.
It also reported that imports plummetted 17.9 percent in another sign of weakening domestic demand.
The National Bureau of Statistics said the consumer price index for the first 11 months of the year was up 6.3 percent over last year.
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