Chinese Inflation Drops to 29-Month Low

Consumer price inflation in China fell to a 29-month low in June, according to a report from the National Bureau of Statistics, issued Monday. Consumer prices in the world’s second-largest economy rose just 2.2 percent from June 2011, according to the report, giving officials a little more wiggle room to relax economic policies after they cut interest rates twice in the last month. The 2.2 percent inflation fell just short of the consensus estimate of 2.3 percent projected by analysts in a recent Bloomberg News survey, while the producer price index fell 2.1 percent, compared to analysts’ expectations for a 2 percent decline.

With Monday’s report, China’s inflation has now fallen short of Premier Wen Jiabao’s target of 4 percent, and likely means that the nation’s economic growth slowed for a sixth straight quarter. Economists expect the Chinese government to take further steps to stop the slide, as economic expansion in the second quarter is believed to have hit a three-year low, bringing Wen’s annual growth target of 7.5 percent very much in doubt.

With many of the world’s larger economies struggling for the last five years or so, China was one of just a handful of bright spots, at least until this year. The nation’s two recent interest rate cuts, the latest of which was announced July 5th, were its first since 2008, and came on the heels of three separate reductions in the minimum requirements for capital reserves among Chinese banks.