China fell deeper into deflation in April, but a tidal wave of money coursed through the economy on the back of an earlier surge in bank lending and cemented expectations that prices would be rising again before the end of the year. Many economists said monetary conditions were already loose enough to fuel a recovery in China without further interest rate cuts and that a sharp decline in new lending in April put credit flows on a more sustainable footing.
Consumer prices fell 1.5 percent in the year to April, marking the third consecutive month of deflation after a 1.2 percent fall in the 12 months to March, the National Bureau of Statistics said on Monday. Factory-gate prices fell 6.6 percent in the year to April, the rate of decline accelerating from a 6.0 percent drop in the 12 months to March.
"The central bank is unlikely to move on this pair of figures. We don't think the central bank is going to cut interest rates any time soon," said Tang Jianwei, an analyst with Bank of Communications in Shanghai. Both falls were one-tenth of a percentage point deeper than markets had expected, but economists said the declines simply reflected a correction to spikes a year ago in the cost of food and other commodities.