China's consumer price index (CPI), the main gauge of inflation, fell 1.5 percent year on year in April, the National Bureau of Statistics (NBS) said Monday.
It was the third decline in a row since February, when the CPI dropped 1.6 percent, which in turn was the first fall since October 2002.
The result was in line with market expectations and analyst forecasts.
Food prices, which comprise one-third of the CPI, dropped 1.3 percent, dragged down by a 28.6-percent decline in pork prices as demand plummeted amid a global flu outbreak thought to be connected with pigs.
Non-food prices fell 1.5 percent.
The index was down 0.2 percent from a month earlier, and the figure for January-April fell 0.8 percent from the same period last year.
Lian Ping, chief economist with the Bank of Communications, said the weakening reflected the high base of comparison, since the CPI soared by 8.5 percent last April. The consecutive declines did not presage deflation, and the figure was expected to rise starting at mid-year.
China's producer price index (PPI), a major measure of inflation at the wholesale level, fell 6.6 percent in April, the fourth monthly decline in a row.
Li Huiyong, analyst with the Shenyin & Wanguo Securities said falling iron and steel prices pushed the PPI down.
However, Lian said the figure was expected to rise from May forward, at least in month-on-month terms, as global commodity prices had begun rising again amid signs of economic recovery.
Last month, domestic prices of copper, aluminum and zinc rose by 10 percent to 20 percent on average. Oil product prices also edged up.
The consecutive falls in the CPI and PPI aroused concerns about deflation in the world's third-largest economy. But analysts said that given the inflationary nature of the government stimulus package and the massive expansion of bank credit in the first quarter, deflation was unlikely.
The country pumped 4.58 trillion yuan (US$670 billion) of new loans into the economy in the first quarter to stimulate growth.
Lending in the early months of 2009 has already neared the 5 trillion yuan of new loans targeted for the whole year. In March alone, new loans increased by a record 1.89 trillion yuan.
The People's Bank of China (PBOC, the central bank) said in its quarterly monetary policy report on May 5 that China would stick to its moderately easy monetary policy and ensure "ample" liquidity at banks.
The State Information Center, a government think tank, predicted in a report released on May 4 that the CPI would drop 1.3 percent in the second quarter.
One hundred economists polled by the China Economic Monitoring & Analysis Center under the NBS at the end of March expected the figure for the whole year would range between 0 to 0.2 percent.
Deflation was unlikely, the survey found, considering the ample bank liquidity and the moderating inflation comparison base in the latter half of 2008.
Premier Wen Jiabao told the annual national legislative meeting in the early March that the inflation target for this year would be about 4 percent.
Xu lianzhong, official with the National Development and Reform Commission, the top planning agency, told Xinhua that the CPI would likely bottom out in the second quarter, so the possibility of further interest rate cuts could not be ruled out.
(Xinhua News Agency May 11, 2009)
