1:17 a.m. EDT May 11, 2009
HONG KONG (MarketWatch) -- China's wholesale price index declined at a quicker pace in April, falling for the fifth-straight month, while consumer prices also accelerated to the downside, according to data released Monday by the National Bureau of Statistics.
But several analysts dismissed the drops as a temporary phenomenon, with the prices to shift higher again in coming months as economic activity picks up.
"As the economy continues to stage a recovery and credit growth continues to expand, consumer prices should show an uptrend in the second half of the year. Importantly, expectations of rising prices in the future will encourage consumer spending," wrote J.P. Morgan analysts in a note Monday.
Wholesale prices, as measured by the producer price index, dropped 6.6% from a year earlier, slightly further than expectations for 6.5% in a Dow Jones Newswire survey of analysts. The decline followed a 6.0% dip in March, with the index in negative territory since December.
The consumer price index fell 1.5% in April, its third month of contraction and a faster drop than the 1.2% decline posted in March. However, analysts said the results largely reflected the effects of softening food prices and were in line with expectations from the Dow Jones survey. Consumer price have been on a weakening trend since February.
Analysts also said the slump in wholesales prices partially reflected the comparison with April 2008, when there was a big surge in oil prices, although the dumping of inventory into the supply chain and price cutting due to overcapacity also affected the results.
"Producer prices will begin to kick up as soon as signs of a global recovery become more prominent and import prices for raw materials rise. Overall, mild deflation at this stage of China's growth cycle is not only tolerable, but a definite positive for households," Cantor Fitzgerald analysts said in a note Monday.
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