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BoCom expects CPI to drop 1.1% in April

By Cai Muyuan (chinadaily.com.cn)
Updated: 2009-05-07 11:42

China's consumer inflation will continue to see negative growth in April by three consecutive months, the research center of the Bank of Communications (BoCom) said in a forecast released on May 5.

Related readings:  Central bank official sees 2009 growth near 8%  Not a bad start for growth  China's economy slows to 6.1 percent in Q1   China's CPI falls 1.2% in March

BoCom said that the consumer price index (CPI) in April would drop about 1.1 percent over last year and maintain a negative growth from February. The decline of the CPI is mainly influenced by the last year's tail-raising factor from the first quarter of this year. Due to the factor, the prices would be affected by the high figures of the same period last year.

The bank's research shows that food prices will be steady overall despite some downward pressure. The tail-raising factor may bring consumer prices down by 1.9 percentage points and is the main reason for the falling CPI.

As the tail-raising factor will be reduced in the second half of the year, BoCom believes the CPI will go up. The continuous negative growth will be terminated by economic recovery of the second half of the year and consumer prices will resume their healthy growth if things go well. The bank also expected inflation will not be a threat this year.