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China's inflation slows to 2.3% year-on-year in June

China's annual inflation slowed to 2.3 per cent in June from a four-month high of 2.5 per cent in May, official data showed on Wednesday.

BEIJING: Chinese inflation slowed to 2.3 per cent in June from a four-month high of 2.5 per cent in May, official data showed on Wednesday, giving authorities further room to stimulate growth in the world's 
second-largest economy.

The country's consumer price index -- a main gauge of inflation -- also rose 2.3 per cent in the first six months of the year from the same period in 2013, the National Bureau of Statistics said in a statement.

The result compared with expectations of a 2.4 per cent gain in a survey of economists by Dow Jones Newswires but is well below the 3.5 per cent annual target set by Beijing in March.

The result comes as concerns earlier this year over economic prospects for China -- a key driver of world growth -- have eased owing to a pick-up in key indicators in the second quarter and some limited steps by authorities to boost the economy.

China's gross domestic product (GDP) grew 7.4 per cent in January-March, weaker than the 7.7 per cent recorded in the final three months of last year and the worst result since a 7.4 per cent expansion in the third quarter of 2012.

But growth in industrial output and retail sales accelerated in May, with consumption increasing at its fastest pace since December, official data showed last month, in signs of renewed strength.

Authorities have since April introduced measures to boost growth, including tax breaks for small enterprises, targeted infrastructure outlays and incentives to encourage lending in rural areas and to small companies.

Economists said the tame price situation means they can do more.

"The subdued inflation outlook provides room for the authorities to launch more targeted stimulus policies in the second half of this year," ANZ Bank economists Liu Li-Gang and Zhou Hao wrote in an analysis of the June data.

They suggested that "further monetary policy easing across the board will still be needed to help lift the confidence in China's economy".

Food was the main driver of inflation, according to the NBS data, with fruit prices up 19.8 per cent in June from the year before.

Despite the CPI slowdown, the overall result was also higher than the 1.8 per cent gain recorded in April, which had led to concerns of deflation risks in the Chinese economy.

Moderate inflation can be a boon to consumption as it encourages consumers to buy before prices go up, but economists say falling prices encourage consumers to put off spending and companies to delay investment, both of which act as brakes on growth.

The producer price index (PPI) -- a measure of costs for goods at the factory gate and a leading indicator of the trend for CPI -- also improved to a decline of 1.1 per cent in June, the NBS said in a separate statement, its highest showing in more than two years.

The result compared with a decrease of 1.4 per cent in May and was the highest since a 0.7 per cent decline in April 2012, according to official data.

The last PPI increase was in January 2012, when it rose 0.7 per cent.

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