China’s April CPI down 1.5 per cent, PPI down 6.6 per cent, may avoid deflation

China's consumer price index (CPI), the main gauge of inflation, fell 1.5 per cent year on year in April, the Chinese Bureau of Statistics (NBS), said.

CPI dropped for the third consecutive month to almost late 2002 levels while the producer price index (PPI), a major measure of inflation at the wholesale level, fell 6.6 per cent in April year on year, for the fourth consecutive month. (See: China's January inflation down to 1 per cent; warning signs of deflation)

Food prices, which comprise one-third of the CPI were down 1.3 per cent from a year ago. This was mainly due to sharp drop in pork prices causing demand to tumbled to 28.6-per cent, on fears that global flu outbreak was related to pigs. Pork prices dropped due to slack demand, for the first time since 2008 when a severe shortage of pork  had sent the prices sky rocketing.

The price of meat was down 13.5 per cent while edible oil dropped 24.3 per cent from a year earlier. However, there was a 3.4 per cent increase in the price of aquatic products, grain prices increased 5.5 per cent and vegetables prices surged 10.9 vegetables.

The prices in the non-food sector slid 1.5 per cent according to NBS statistics.

The results are in line with market expectations and forecast from senior analyst.

The CPI index was down 0.2 per cent from March, while the January-April data fell 0.8 per cent from the same period last year.

CPI dropped after food and energy prices diminished from last year's high levels, resulting in annual falls of 1.6 per cent in February and 1.2 per cent in March.

The PPI index declined 6.0-per cent in March. Prices of production materials fell 8.1 per cent in April year on year, said the NBS.

The PPI dropped 4.6-per cent in the first quarter while in the January-April period it dropped 5.1 per cent over the same period last year, it said.

According to analyst warning signs of deflation, anticipated in January are subsiding as global commodity prices have began rising and China's economy is showing signs of recovery.

The Chinese government is asking banks to lend more to boost growth and new loans are expected to surge more than 57 per cent in 2009. (See: China sees an 8 trillion yen loan surge in 2009)

The People's Bank of China said in its quarterly report said that China's economy is fairing "better than expected" in the first quarter of 2009, and central bank will provide "ample" liquidity in the financial system to sustain economic recovery. (See: China central bank assures "ample" liquidity to sustain economic recovery)