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BoCom expects negative CPI growth in H1

(chinadaily.com.cn)
Updated: 2009-06-04 16:37

China's Consumer Price Index (CPI) is set to record the fourth consecutive month of decrease in May and to remain negative in the first half of this year, according to a Bank of Communications (BoCom) report released Monday.

Food prices are expected to drop slightly in May with 1.5 percentage points of the decline due to the tail-raising factor, which was the main reason for the CPI decline in May, according to the report.

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Based on data from the Ministry of Agriculture and the Ministry of Commerce, the report said CPI growth would be between minus 1.8 percent and minus 1.2 percent with the median minus 1.5 percent in May, making it the fourth consecutive month of negative growth since February this year.

Tang Jianwei, senior macro-economy analyst from BoCom, said last year's tail-raising factor was the main reason for the CPI decline since the beginning of the year. If the minus 1.53 percent tail-raising factor of the first four months was removed, the newly added factor would be 0.7 percent, a positive number, which meant the deflation was not as serious as expected.

Price growth in June was expected to follow the current trend and negative CPI growth in the first half of 2009 had already come to stay, Tang added.

As the tail-raising factor would be reduced in the second half of the year and the price adjustment of refined oil may influence the CPI, Tang believed the CPI would go up slightly, but there's no need to worry about inflation within the year.