BEIJING—Inflation in China slowed significantly in May, giving Beijing additional room to loosen policy and stimulate growth.
The country's consumer price index rose 3.0% from a year earlier in May. That was down from April's 3.4% rise. The key inflation reading was also below expectations, which were for a 3.2% increase, according to an earlier Dow Jones poll of economists.
"Inflation is easing as expected, or easing even faster than expected, which is mainly due to economic weakening not only in China but also around the world," said UBS UBS -0.51% economist Wang Tao.
She said she expects inflation to keep declining over the coming months, which will give Beijing room to further stimulate the economy.
"China's inflation will continue to move downward until the end of 2012," said Standard Chartered economist Li Wei.
He added that the full-year inflation rate will likely come to about 2%, which would be down sharply from the 5.4% inflation rate seen last year.
"This means Beijing has great leeway to loosen macroeconomic policy to boost growth," he said. China's fading inflation pressure shows why authorities have been comfortable in recent months dialing up support for the economy, including the first cut to interest rates since 2008 in a move announced Thursday.
Analysts say top policy makers in China likely have access to some economic data before they are released to the public.So China's central bank, the People's Bank of China, may have seen the weak inflation reading before it pushed interest rates lower.
The PBOC cut benchmark lending and deposit rates by 0.25 percentage point, and also allowed rates to move within a wider range, with deposit rates free to float slightly higher and lending rates free to move slightly lower.
Standard Chartered's Mr. Li said the PBOC could cut rates up to two more times in the third quarter of this year.
China has rolled out a series of initiatives over the last few weeks to support the economy, including new purchase incentives for energy-efficient household appliances, targeted tax cuts, and accelerated approval for investment projects by companies and local governments.
On Friday, government officials called for additional spending on railway construction. More data due to be released Saturday afternoon will shed further light on the state of the Chinese economy.
The National Bureau of Statistics will release data on May industrial production and retail sales, and January-May fixed-asset investment. The data were weak across-the-board in April, which prompted the flurry of government stimulus measures.
Food prices, which were the main contributor to inflation last year, continued to moderate. Food prices were up 6.4% from a year earlier in May, compared with April's 7.0% rise.
Nonfood prices rose 1.4% from a year earlier, compared with April's 1.8% increase. Meanwhile, the producer price index, which measures wholesale prices paid by businesses, fell by 1.4% from a year earlier in May, compared to a 0.7% decline in April and economists' expectations for a 1.1% decline.
wsj.com
The country's consumer price index rose 3.0% from a year earlier in May. That was down from April's 3.4% rise. The key inflation reading was also below expectations, which were for a 3.2% increase, according to an earlier Dow Jones poll of economists.
"Inflation is easing as expected, or easing even faster than expected, which is mainly due to economic weakening not only in China but also around the world," said UBS UBS -0.51% economist Wang Tao.
She said she expects inflation to keep declining over the coming months, which will give Beijing room to further stimulate the economy.
"China's inflation will continue to move downward until the end of 2012," said Standard Chartered economist Li Wei.
He added that the full-year inflation rate will likely come to about 2%, which would be down sharply from the 5.4% inflation rate seen last year.
"This means Beijing has great leeway to loosen macroeconomic policy to boost growth," he said. China's fading inflation pressure shows why authorities have been comfortable in recent months dialing up support for the economy, including the first cut to interest rates since 2008 in a move announced Thursday.
Analysts say top policy makers in China likely have access to some economic data before they are released to the public.So China's central bank, the People's Bank of China, may have seen the weak inflation reading before it pushed interest rates lower.
The PBOC cut benchmark lending and deposit rates by 0.25 percentage point, and also allowed rates to move within a wider range, with deposit rates free to float slightly higher and lending rates free to move slightly lower.
Standard Chartered's Mr. Li said the PBOC could cut rates up to two more times in the third quarter of this year.
China has rolled out a series of initiatives over the last few weeks to support the economy, including new purchase incentives for energy-efficient household appliances, targeted tax cuts, and accelerated approval for investment projects by companies and local governments.
On Friday, government officials called for additional spending on railway construction. More data due to be released Saturday afternoon will shed further light on the state of the Chinese economy.
The National Bureau of Statistics will release data on May industrial production and retail sales, and January-May fixed-asset investment. The data were weak across-the-board in April, which prompted the flurry of government stimulus measures.
Food prices, which were the main contributor to inflation last year, continued to moderate. Food prices were up 6.4% from a year earlier in May, compared with April's 7.0% rise.
Nonfood prices rose 1.4% from a year earlier, compared with April's 1.8% increase. Meanwhile, the producer price index, which measures wholesale prices paid by businesses, fell by 1.4% from a year earlier in May, compared to a 0.7% decline in April and economists' expectations for a 1.1% decline.
wsj.com
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