CHINA’S June consumer inflation grew at its slowest pace since January as increases in food prices eased, while producer prices extended their decline, reinforcing economists’ views that more government stimulus steps will be needed to support the economy.

    The consumer price index (CPI) rose 1.9 percent in June from a year earlier, compared with a 2.0 percent increase in May, the National Bureau of Statistics said yesterday. Analysts had expected a 1.8 percent gain, a Reuters poll showed.

    Consumer inflation has remained low compared with the official target of around 3 percent for this year, indicating persistently weak demand in the world’s second-largest economy.

    Food prices were up 4.6 percent in June, compared with a 5.9 percent gain in the previous month. Prices of China’s staple meat pork rose 30.1 percent, compared with a 33.6 percent increase in May.

    Non-food prices inched up 1.2 percent in June versus May’s 1.1 percent gain.

    “In our view, while China reiterates the importance of supply-side reform due to debt and overcapacity concerns, the authorities still need to stimulate demand in order to achieve its growth target,” Zhou Hao, senior Asia emerging market economist at Commerzbank in Singapore, said in a note.

    he People’s Bank of China (PBOC) last cut interest rates Oct. 23, the seventh time since late 2014, as the government took steps to counter slowing economic growth.

    China’s leaders have set an economic growth target of 6.5 percent to 7 percent for 2016. The economy expanded 6.9 percent last year, its slowest pace in a quarter of a century.

    A top government-backed think tank forecast in late June that consumer prices will likely rise 2 percent for the year, while the long decline in producer prices will ease.

    “Of course, further policy easing is still on the cards, and we hold our view that the PBOC will cut both interest rates and reserve rate requirement this month,” Zhou said.

    Other economists say authorities should use fiscal policy to boost growth, adding that question marks remain over the effectiveness of further monetary easing.

    In June, the producer price index (PPI) dropped 2.6 percent from a year earlier. Analysts had expected PPI to fall 2.5 percent.

    The decline extended a falling streak to 51 consecutive months, though it continued to moderate, suggesting strains on companies’ profits may be easing. The PPI eased 2.8 percent in May.

    (SD-Agencies)