China Inflation Stays Subdued as Producer Prices Extend Decline

China’s inflation stayed subdued in January while factory-gate prices extended the longest drop since the 1990s, in a sign of moderating demand in the world’s second-largest economy.

The consumer price index rose 2.5 percent from a year earlier, the National Bureau of Statistics said today in Beijing, the same pace as in December. The producer-price index fell 1.6 percent. China’s economic data are distorted in January and February by the shifting timing of the week-long Lunar New Year holiday, which began on Jan. 31 this year.

Today’s reports may give China’s leaders more room to support economic growth that analysts estimate will be the slowest in 24 years in 2014. The ruling Communist Party is trying to balance reining in a credit boom and extravagant spending by officials with maintaining expansion above Premier Li Keqiang’s 7 percent “bottom line” to sustain employment.

Credit Suisse Group AG earlier this week cut its estimate for January consumer-price inflation to 2.2 percent from 3 percent, citing weak retail sales during the holiday and lower meat consumption due to a renewed outbreak of bird flu. The firm also lowered its full-year forecast to 3 percent from 4 percent.

“The central bank seems to be tuning down its concerns over rising inflation,” Credit Suisse economists led by Dong Tao in Hong Kong wrote, citing a report this month from the People’s Bank of China.

To contact the reporter on this story: Rachel Butt in Hong Kong at rbutt4@bloomberg.net

To contact the editors responsible for this story: Hwee Ann Tan at hatan@bloomberg.net; Paul Panckhurst at ppanckhurst@bloomberg.net

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