The growth of China's producer price index (PPI) slowed to 5.8
percent year-on-year in January, giving fresh evidence that the
government's austerity measures are succeeding in helping to rein
in the economy.
Down from a 7.1 percent increase in December, producer prices
saw their slowest growth in eight months, according to figures
released by the National Bureau of Statistics (NBS) yesterday.
"This is definitely good news for the government," said Stephen
Green, senior economist with the Standard Chartered Bank of
England.
Analysts say that the drop is the result of efforts to prevent
runaway economic growth since last year.
The index is one of the most important gauges that government
officials and economists use to monitor the progress of the
nation's economy.
According to the NBS, the purchase prices of raw materials, fuel
and power jumped by 10.7 percent year-on-year in January, with the
growth rate slightly down from average levels in 2004.
The price of crude oil and refined oil saw an obvious decline in
January. The PPI for crude oil rose 19.1 percent year-on-year, down
from 35.6 percent in December.
Many economists had expected the PPI to fall in January, but
"the sharp decrease was still a bit stronger than anticipated,"
said Green.
He expects there could be possible PPI rebounds within the next
few months.
Analysts said the drop in producer prices reflects the cooling
down of the economy on the one hand, but the evidence is not strong
enough for any anticipation that inflationary pressures are already
wiped out and there will be no need for further hikes in interest
rates.
Gao Huiqing, a senior economist with the State Information
Center, said the consumer price index (CPI), a more important
barometer for inflation, is not necessarily in tandem with producer
prices.
The CPI soared rapidly at the start of last year, adding to
concerns about inflation among policy makers.
High inflation was one factor nudging the central bank to make
up its mind in October to raise interest rates in a series of steps
taken to rein in heavy investment in overheated sectors, such as
steel and cement.
(China Daily February 22, 2005)