CPI growth stays steady

Low inflation leaves room for further stimulus

China's consumer price inflation held steady at 2.3 percent in July, official data showed over the weekend, offering -policymakers substantial leeway, if needed, to stimulate the economy.

The consumer price index (CPI), a main gauge of inflation, came in unchanged from the previous month at 2.3 percent in July year-on-year, broadly in line with market expectations, according to figures released on Saturday by the National Bureau of Statistics (NBS).

Food prices were up 3.6 percent year-on-year in July, contributing 1.18 percentage points to the overall inflation rate, the data showed. On a monthly basis, the consumer inflation edged up 0.1 percent in July.

The producer price index (PPI), a gauge of inflation at the wholesale level, staged a mild recovery in July, posting a decline of 0.9 percent year-on-year during the month versus a drop of 1.1 percent in June.

The eased factory price deflation indicated recovering demand for industrial products, Yu Qiumei, a senior statistician at the NBS, said in a statement posted on the bureau's website on Saturday.

The July reading will continue to keep consumer inflation off the list of indicators which are cause of concern for the Chinese economy, analysts said.

Inflationary pressures appear to be largely absent from the current economic picture this year, Wang Yiwei, a macroeconomic analyst with Everbright Securities Co, told the Global Times on Sunday. The nation's inflation rate so far has been well below the government's target of 3.5 percent set for the year.

The consumer inflation will remain moderate for the remainder of the year, Wang believes.

In a research note sent to the Global Times on Saturday, economists led by Lian Ping at Bank of Communications said that the inflation rate may continue slight downward movement, as a low base effect in coming months will contribute to restrained inflation rates.

As real estate transactions remain subdued, the housing rental costs may as well see a slight fall driving down the overall price level, the economists believe, projecting the CPI for the whole year to be about 2.2 percent.

With a likely softer inflationary trajectory, the Chinese government is seen to have plenty of room in stimulating the economy, if required.

China's economy has received a boost following a flurry of mini-stimulus measures that were launched over the past few months, with the GDP growth ratcheting up to 7.5 percent in the second quarter from the first quarter's 7.4 percent.

But uncertainties remain over the outlook for the economy in the near future, leaving room for further measures by the government, said Wang at Everbright Securities Co.

In a latest sign of economic uncertainty, the country's imports in US dollar terms posted a fall of 1.6 percent in July on a yearly basis, although its exports beat expectations to grow 14.5 percent year-on-year during the month, customs data showed on Friday.

The flagging import data reflects continuing weakness in domestic demand despite the implementation of a slew of pro-growth measures, Liu Dongliang, a senior analyst at China Merchants Bank in Shanghai, said in a note sent to the Global Times on Friday.

Downward pressures on the economy might loom as early as the fourth quarter, according to Liu, who said the Chinese government will consider announcing more pro-growth measures.

Still some believe the Chinese economy is well on track for a modest recovery.

"There shouldn't be any doubts that the economy will continue an upward trend in the second half," Chen Wei, an analyst at China Minzu Securities Co, told the Global Times on Sunday.

Likewise, he noted the consumer inflation may move upward over the coming months instead of experiencing a downward spiral. The CPI inflation for the whole year should stand at about 3 percent, Chen estimated.