China inflation quickens to fastest pace in 4 mths on food

The producer-price index fell 1.4% after a 2% decline the previous month

China's inflation accelerated in May to the fastest pace in four months on food costs, while a decline in factory-gate prices moderated.

Consumer prices rose 2.5 per cent from a year earlier, the statistics bureau said today in Beijing. That exceeded the median 2.4 per cent estimate in a Bloomberg News survey of economists. The producer-price index fell 1.4 per cent after a 2 per cent decline the previous month.

Inflation below the government's full-year target of 3.5 per cent leaves room for more monetary easing in an economy projected to grow this year at the slowest pace since 1990. While Premier Li Keqiang is resisting broad stimulus, limited loosening has included Monday's announcement of a cut in some banks' reserve requirements from June 16, intended to support agriculture and small businesses.

"Low inflationary pressure provides room for further reserve-ratio cuts in the coming months," said Hu Yifan, chief economist at Haitong International Securities Group Ltd in Hong Kong.

The Shanghai Composite Index gained 0.4 per cent as of the 11:30 am local-time trading break.

Food costs

Food prices rose 4.1 per cent in May from a year earlier, compared with a 1.7 per cent gain for non-food costs. China's economy may expand 7.3 per cent this year, according to a Bloomberg survey of analysts, down from 7.7 per cent in 2013 and compared with a government target of about 7.5 per cent.