China Inflation Misses Estimates, Providing Room for Easing

China’s consumer prices in April rose at half the pace the government is targeting for 2015, suggesting the central bank may need to add to its recent monetary easing to spur a pickup in domestic demand.

The consumer-prices index increased 1.5 percent from a year earlier, missing the median estimate of 1.6 percent in a Bloomberg News survey of analysts, a release from China’s statistics authority showed in Beijing. The producer-prices index fell 4.6 percent, extending a record stretch of declines.

The central bank has cut benchmark interest rates and the required deposit reserve ratio twice in the past six months to aid growth. Central bank chief Zhou Xiaochuan has flagged the risks of deflation in an economy that last quarter expanded at the weakest pace since 2009.

“Disinflation pressure is still severe,” Liu Li-Gang, chief economist for Greater China at Australia & New Zealand Banking Group Ltd. in Hong Kong, said by phone. China “may ease monetary policy and a cut in interest rate is very likely to occur this month.”

Food prices climbed 2.7 percent from a year earlier, while non-food costs were up 0.9 percent. From a month earlier consumer prices declined 0.2 percent in April.

Producer prices were again damped by a slump in mining. Overall producer prices declined for a record 38th month.

The central bank Friday said it will walk a fine line in its policy operations as rising debt endangers the nation’s economic expansion.

‘Appropriate Environment’

“We will prevent excessive easing to avoid cementing economic distortion or pushing up debt and leverage levels; on the other hand, we will create a neutral and appropriate monetary environment” for growth, the People’s Bank of China said in its monetary policy report. The bank also said that China’s exports won’t see big improvement.

Overseas shipments unexpectedly fell 6.2 percent in yuan terms in April, the customs administration said on Friday, putting additional pressure on growth. The government has set a CPI target of about 3 percent for 2015.

— With assistance by Xin Zhou, and Feifei Shen

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