China's inflation rate fell for the third month in a row in April as prices for foods and energy plunged from high levels the year before.
The consumer price index, which is heavily weighted toward food items, fell 1.5 percent in April from a year earlier after declining 1.2 percent in March and 1.6 percent in February, the National Statistics Bureau reported Monday.
Food prices fell 1.3 percent, with prices for meat falling 13.5 percent, the bureau said in a statement on its Web site.
A key factor then was shortages of pork due to an outbreak of blue ear disease. The ailment, also known as porcine reproductive and respiratory syndrome, killed hundreds of thousands of pigs before it was brought under control.
The outbreak caused farmers to stop raising pigs because of worries they would become infected. That sent the price of pork — China's staple meat — sharply higher.
In April, pork prices plunged 28.6 percent, the Statistics Bureau said.
Meanwhile, it reported that producer prices fell 6.6 percent in April from a year earlier, compared with 6.0 percent in March, thanks largely to lower energy costs.
Overall, costs for fuel and raw materials fell 9.6 percent in April, the report said.
While a protracted bout of deflation would be unwelcome, April's decline was expected, and the data initially helped push share prices higher Monday.
But the benchmark Shanghai Composite Index fell back later in the day as investors sold shares to cash in on recent gains, ending 1.8 percent lower at 2,579.75.
Deflation is expected to persist for several months due to excess inventory in many industries amid the global economic downturn. Sharp declines in crude oil prices and costs for other commodities will ensure that.
But signs of economic recovery in China suggest a reduced risk for a prolonged bout of lower prices that could drag growth lower if consumers put off purchases in expectation of lower prices, forcing companies to cut wages and investment, economists say.
The government has pumped billions of dollars into construction projects and other spending aimed at stimulating demand and propping up growth. Recent improvements in manufacturing, auto sales and real estate transactions are seen as evidence the strategy has begun to work, despite persistently weak demand for Chinese exports in overseas markets.
"Deflationary concerns appear to be subsiding as the economy shows signs of recovery," Jing Ulrich, chairwoman for China equities at J.P.Morgan said in a report to clients.
"Consumer prices should show an uptrend in the second half of the year. Importantly, expectations of rising prices in the future will encourage consumer spending," Ulrich said.
Government moves to liberalize controls on utility rates and fuel prices, which have been kept lower than global levels, will also push prices higher, she said.
On the Net:
National Bureau of Statistics of China (in Chinese): http://www.stats.gov.cn
(This version CORRECTS Corrects percentage decline in share index.)
Source: AP News