China Inflation Eases Sharply In March As Food Price Growth Slows

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Chinese inflation eased sharply in March after climbing to a ten-month high in February, as seasonal increases in food prices receded, the latest figures from the National Bureau of Statistics showed Tuesday.

The consumer price index rose 2.1 percent year-on-year in March, slower than the 3.2 percent rise in February. Economists expected the rate of inflation to ease to 2.5 percent.

Food prices increased 2.7 percent annually in March, much slower than the 6 percent rise reported in February, when food costs were pushed up due to Lunar New Year festivities.

Non-food prices rose 1.8 percent and housing costs gained 2.9 percent from the same month last year. Clothing prices increased 2.3 percent compared to a 2.2 percent increase in utility costs. Meanwhile, transportation costs fell 1.2 percent.

Separately, the statistical office reported that the producer price index fell 1.9 percent year-on-year in March, in line with expectations. In February, the PPI was down 1.6 percent.

Meanwhile, several local governments in China are preparing to implement fresh property curbs this month to rein in house prices. Beijing has already imposed curbs by increasing the down payment for second home buyers.

Weak economic activity last year kept inflation in check throughout the period and this allowed the People's Bank of China to reduce interest rate twice last year to support the economy. The country's growth slumped to a 13-year low 7.8 percent in 2012.

However, the economy ended seven quarters of slowdown in the fourth quarter of 2012, with the gross domestic product growing 7.9 percent.

In a report released today, the Asian Development Bank said that it expects inflation in China to remain muted in 2013. The government has an inflation target of 4 percent for this year.

The lender forecasts strong consumption and fiscal spending to fuel a rebound in growth in 2013, though government steps to cool pressures on the environment and to narrow income gaps will limit the upside in 2014. ADB forecasts GDP growth of 8.2 percent for 2013 and 8 percent for 2014.

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