HONG KONG — Inflation and industrial activity in China cooled markedly in November, according to data released Friday — an important development that raises the likelihood that the authorities in Beijing will seek to inject more momentum into an economy that has become a key engine of global growth.
Consumer price inflation, which had topped 6 percent earlier in the year, sagged to just 4.2 percent in November, the Chinese statistics office reported. The increase was less than analysts had expected and marked a significant improvement from the 5.5 percent reading recorded the previous month.
At the same time, industrial output data, also released on Friday, showed that activity in November expanded just 12.4 percent from a year earlier. That reading was weaker than the 13.2 percent annual increase recorded in October, and highlighted a development that has become apparent in recent months: economic growth, which was red hot in 2010 and early 2011, has moderated significantly this year.
The positive news is that tighter bank lending, higher interest rates, curbs on property speculation and slowing export growth have also helped to ease inflation, which soared well above Beijing’s comfort level over the summer.
Better-than-expected harvests also have helped bring down food price inflation, which is a particularly sensitive issue in a country where many millions still struggle to make ends meet.
Although it may still be too early for China to claim complete victory over inflation, the sharp drop in inflation “does free up some wiggle room for monetary easing,” Xianfang Ren and Alistair Thornton, economists at IHS Global Insight in Beijing, wrote in a note Friday.
The Chinese authorities’ focus has increasingly shifted from fighting inflation to bolstering growth, especially as Europe, a key destination for Chinese-made goods, is mired in a debt crisis that has badly undermined growth prospects there.
The central bank in South Korea on Friday underscored the effect that a slowdown in the West will have across Asia when it lowered its 2012 growth forecast for South Korea to 3.7 percent, from an earlier projection of 4.6 percent.
And in Japan, revised gross domestic product data showed that the economy grew by less than initially expected during the past quarter: 5.6 percent annual growth from a previous estimate of 6 percent, and 1.4 percent quarterly growth from the previous estimate of 1.5 percent.
The worsening environment has already prompted several rate cuts in the Asia-Pacific region as policy makers race to shore up their economies.
The first significant policy response by Beijing came last week, when the central bank loosened the reins on bank lending by lowering the so-called reserve requirement ratio. Lower reserve requirements effectively free up more lending by banks.
The inflation data on Friday suggested that there will be another cut in the reserve requirement ratio in December, economists at ANZ in Hong Kong said in a note. “We also expect two more such cuts in the first half of 2012,” they said.
The government also “has considerable scope to support domestic demand by boosting income growth and by reducing the tax burden for both companies and individuals,” Jing Ulrich, chairwoman of global markets at JPMorgan Chase, wrote in a note on Friday.
Unlike in 2008 and 2009, when the Beijing introduced a 4 trillion renminbi, or $629 billion, stimulus package, the government’s response this time is likely to be “nuanced,” Ms. Ulrich said.
Article source: http://feeds.nytimes.com/click.phdo?i=b9b1b2823aa8627f1941771d8be12113
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