China’s March inflation eases, fueling questions about strength of recovery

BEIJING, China – China’s inflation declined in March, easing pressure on consumers but fueling questions about the strength of its recovery.

Government data Tuesday showed consumer prices rose 2.1 per cent, down from the previous month’s 3.2 per cent and well below the official target for the year. Wholesale prices declined by 1.9 per cent compared with last year.

The decline in inflation suggests consumer demand is still lacklustre despite a rebound in economic growth in the final quarter of last year.

“This is not a healthy recovery,” said IHS Global Insight analyst Alistair Thornton in a report.

Growth in the world’s second-largest economy rose to 7.9 per cent in the three months ending in December, up from the previous quarter’s 7.4 per cent.

Other indicators show a recovery is under way but analysts say it is being propped up by government spending and bank lending, while consumer spending is growing slowly. They say the rebound will be gradual and could be vulnerable if investment or trade weakens.

February’s inflation of 3.2 per cent was the highest in 10 months but figures early in the year are distorted by the Lunar New Year holiday, when companies suspend business and families stock up on gifts and food for banquets. Inflation in January ahead of the holiday was just 2 per cent.

Manufacturing activity accelerated in March but was weak, according to the China Federation of Logistics and Purchasing, an industry group. Its purchasing managers index rose to 50.9 from February’s 50.1 on a 100-point scale on which numbers above 50 indicate an expansion.

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National Bureau of Statistics (in Chinese): www.stats.gov.cn