Updated: 07/09/2014 15:00 | By Agence France-Presse

China inflation slows to 2.3% in June

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

China inflation slows to 2.3% in June

China's inflation slows to 2.3% in June from a four-month high of 2.5% in May, official data shows - by Wang Zhao

The country's consumer price index -- a main gauge of inflation -- also rose 2.3 percent 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 the median forecast of a 2.4 percent gain in a survey of 21 economists by The Wall Street Journal, but is well below the 3.5 percent annual target set by Beijing in March.

It 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 percent in January-March, weaker than the 7.7 percent recorded in the final three months of last year and the worst result since a 7.4 percent 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.

China announces second-quarter GDP results on July 16.

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 have dubbed the steps a "mini-stimulus", in contrast to the massive pump-priming that took place in the aftermath of the 2008-2009 global financial crisis, something leaders say is not on the cards now.

- Room for more -

But analysts said the tame price situation meant further steps could be be taken.

"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".

Chinese Premier Li Keqiang, in remarks on Monday at a joint news conference with visiting German Chancellor Angela Merkel, said China's growth improved in the second quarter but that more will be done to underpin it in the face of "downward pressure".

China will "not adopt strong stimulus" but rather "will increase the strength of targeted measures", Li said. 

"We will further push forward reforms and opening-up and make more efforts to reform (the) government approval system and lower market access thresholds."

Food was the main driver of inflation in June, rising 3.7 percent year-on-year, according to the NBS data, with fruit prices up 19.8 percent. Still, food cost increases slowed from the 4.1 percent recorded in May.

The producer price index (PPI) -- a measure of costs for goods at the factory gate and a leading indicator of the trend for CPI -- improved to a decline of 1.1 percent 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 percent in May and was the highest since a 0.7 percent decline in April 2012, according to official data. The last PPI increase was in January 2012, when it rose 0.7 percent.

Li announced in March that China's economic growth target for this year is "around 7.5 percent", the same objective as for 2013.

In the event, GDP grew 7.7 percent last year, the same as 2012, matching the worst pace since 7.6 percent in 1999.

"We expect Beijing to continue rolling out a slew of small-scale measures to deliver the around 7.5 percent annual growth target," Bank of America Merrill Lynch economists Lu Ting and Zhi Xiaojia said in a research note.

"But we believe Beijing will resist calls for universal measures such as cutting benchmark rates and cutting RRR for all banks," they added, referring to the reserve requirement ratio, the amount of cash banks must keep on hand.

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