source from：WSJ
ECONOMY  ASIA ECONOMY
China Inflation Rate Steady for Third Straight Month
CPI rises 2.3% in April, giving China’s central bank more leeway to ease monetary policy



By MARK MAGNIER
Updated May 10, 2016 12:15 a.m. ET
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BEIJING—-China’s consumer-inflation rate held steady in April, giving the central bank more leeway to ease monetary policy as the world’s second-largest economy battles weak demand.


The National Bureau of Statistics reported Tuesday that China’s consumer-price index rose 2.3% from a year earlier in April, unchanged for the third consecutive month with higher vegetable and pork prices offset by lower fruit and egg prices. The CPI figure undershot a median 2.4% gain forecast by 15 economists in a survey by The Wall Street Journal.


China’s producer-price index decelerated by a better than expected 3.4% in April, compared with a 4.3% deceleration in March. PPI, a measure of prices at the factory gate, has remained in deflationary territory for more than four years.


Economists said April’s consumer-inflation rate, well below Beijing’s 2016 target ceiling of 3%, leaves ample room for the People’s Bank of China to continue its easy-money policies in the face of weak demand. China’s economy expanded by 6.7% in the first quarter, its slowest quarterly pace since 2009, bolstered by record credit expansion and ramped-up stimulus spending.


“Lower CPI--with inflation below 3% and even below 2.5%--should allow the PBOC to continue easing.” said Mizuho Securities Asia Ltd. economist Shen Jianguang. He called the rate “good news” for the economy.


Vegetable and pork prices remained relatively high after the February Lunar New Year holiday, in part due to bad weather and a shortfall in the number of sows and piglets produced by farmers.

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‘I just feel like I don’t have enough money to buy stuff.’
—Chen Juan, a retired nurse

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That has left Chen Juan, a retired 59-year-old nurse living in Beijing, with sticker shock. “Now, 500 grams (17.5 ounces) of pork cost you 16 to 17 yuan,” or around 2.50 dollars, she said, pushing her grandson in a baby stroller. “That’s two or three times what it was last year.”


In response, Ms. Chen said, she is dining out less and cutting back on pork at home in favor of beans. “I just feel like I don’t have enough money to buy stuff,” she added.


The government closely monitors pork prices given their potential impact on social stability. Price increases of around 80% in 2007 and 60% in 2011 sparked protests and scuffles. Last week, the Beijing city government pledged to release 3,050 metric tons of frozen pork from the government’s strategic pork reserves at discount prices after two other cities, northeastern Dalian and Xian in the northwest, announced similar programs.


Food prices account for approximately one-third of the weighting used to calculate China’s CPI, which came in at 1.4% last year, so higher pork prices could keep consumer inflation above 2% until early 2017, economists said. Standard Chartered Bank Ltd. recently raised its consumer-inflation forecast for the year to 2.1% from 1.7%.


On the producer side, too many Chinese factories pumping out more goods than buyers have appetite for has left manufacturers in a four-year battle with deflation, which raises the cost of paying back debt. Beijing recently announced plans to cut overproduction in the steel and coal industries by around 10% over five years, although industry analysts say more is needed to better balance demand and supply.


“Factories are in no hurry to increase their supply despite recent price recovery as there are still a lot of uncertainties,” said China Merchants Securities economist Yan Ling.


Raw-material prices at the factory gate continued to edge up sequentially in April, mirroring the trend in global commodity prices, prompting some economists to expect the return of producer inflation toward year-end. Decelerating industrial deflation could help corporate profits, which tend to move in tandem with factory prices, economists said. Industrial profits rose 7.4% year on year in the first quarter, after falling 2.3% in 2015.


“While deflation is very painful, the reversal of it could also lead to higher nominal growth and inventory restocking,” said Macquarie Group Ltd. in a research note. “As such, corporate earnings growth could see a sizable upswing.”


—Grace Zhu and Liyan Qi contributed to this article.