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China inflation cools in October; housing transactions down 25% from September

Thursday, November 10th 2011 - 05:56 UTC
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Pressure growing for Central bank to ease credit conditions Pressure growing for Central bank to ease credit conditions

China's inflation cooled in October, home sales fell and industrial output grew at the slowest pace in a year, adding pressure for measures to support growth in the world's second-biggest economy.

Consumer prices rose 5.5% from a year earlier, the least in five months, and industrial production increased 13.2%, the statistics bureau said on its website Wednesday. Housing transactions slid 25% from September, the bureau's data showed.

“Selective easing is already underway” said Chang Jian, an economist at Barclays Capital in Hong Kong, citing government support for small businesses and low-cost housing projects. More “aggressive” loosening would depend on further declines in inflation and growth, said Chang, who formerly worked for the Hong Kong Monetary Authority and the World Bank.

Chinese officials aim to tame consumer prices and make housing affordable without triggering an economic slump as Europe's debt crisis threatens export demand. Fiscal policy may be the “first line of defence” for China if global turmoil worsens, Christine Lagarde, managing director of the International Monetary Fund, said in Beijing Tuesday.

Most economists expect the government to loosen fiscal or monetary policy without cutting interest rates as inflation stays above a full-year target of 4%.

Industrial output growth compared with a 13.8% gain in September and economists' median estimate of 13.4%. Passenger-car sales increased at the slowest pace in five months, separate data from the China Association of Automobile Manufacturers showed yesterday.

The association estimates that if a slowdown in economic growth accelerates in November and December, banks' reserve requirements may be cut before the Chinese New Year in mid January to boost market sentiment, but a reduction in interest rates is unlikely until inflation falls below 3.5%,

China's inflation may moderate further as raw-material costs decline, reflecting headwinds to the global recovery from faltering US growth and the prospect of a recession in Europe.

Categories: Economy, International.
Tags: Bank of China.

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