Inflation eases in China to two-year low amid economic slowdown - Los Angeles Times

BEIJING â€" Inflation in China eased in May to its lowest level in two years amid a broadening economic slowdown that led to the country’s first interest rate cut since 2008.

China's  consumer price index grew 3.0% from a year ago, below many estimates and down from 3.4%  year-on-year growth in April.

The country's National Bureau of Statistics also reported Saturday that the producer price index, a measure of inflation on the wholesale level, fell 1.4% from a year ago, the third consecutive month of decline.

The softening prices gives  China's central planners more room to ease monetary policy in a bid to steer the world's second-largest economy away from a hard landing.

"The good news? Receding consumer price inflation frees up much-needed space for policymakers to loosen credit and roll out investment plans," wrote Alistair Thornton, a Beijing-based analyst for IHS Global Insight, in a report Saturday. "The bad news? China’s producers are seeing sharp deflation, pointing to a worrying lack of final demand. Both should act as a spur for the government to move more aggressively."

China cut its benchmark interest rates Friday for the first time in 3 1/2 years in hopes of stabilizing growth after April produced a series of especially weak economic data.

The Asian powerhouse has been battered by weakening demand for its exports and a cooling property sector. The Shanghai stock market's composite index closed Friday recording its steepest weekly slide this year.

This time last year, Beijing was focused on beating three-year-high inflation that rankled ordinary citizens complaining about the soaring cost of food.

Now the focus has shifted to buoying the economy and averting the mass unemployment triggered by the 2008 financial crisis, when an estimated 20 million migrant workers went jobless.

Though economists say the situation is not nearly as dire as it was in 2008, they still acknowledge that the European debt crisis and potential breakup of the EU could trigger a double-dip global recession.

Analysts expect another round of grim data Sunday when China releases industrial production, retail sales and fixed asset investment numbers for May.

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