China's Inflation Slows

China's inflation cooled to the slowest pace in 17 months, making further interest-rate cuts more likely as the world's fourth-biggest economy loses steam

Consumer prices rose 4 percent in October from a year earlier, the statistics bureau said today, after gaining 4.6 percent in September. Food rose 8.5 percent, the smallest increase since May 2007.

Inflation has halved from February's 12-year high and the government has switched from efforts to cool the economy to unveiling a 4 trillion yuan ($586 billion) package to prop up growth. The central bank may keep lowering borrowing costs after three reductions in the past two months, People's Bank of China Governor Zhou Xiaochuan said Nov. 9 in Sao Paulo.

After accelerating in 2007 and early 2008, largely because of a pork shortage, inflation has slowed for six straight months on improved food supplies and falling prices for energy and commodities.

China's economy has also cooled, expanding 9 percent in the third quarter, the weakest pace in more than five years.

In the first half of this year, the government pledged a tight monetary policy to prevent overheating after an 11.9 percent expansion in 2007, the fastest growth in 13 years. Now, the official stance is ``relatively loose,'' after the global slowdown and financial crisis eroded export orders and slumping property sales weakened domestic demand.

Pork fell 1.2 percent in October from a year earlier, after climbing 2.6 percent in September. Non-food prices rose 1.6 percent, down from the previous month's 2 percent gain.

Producer prices rose 6.6 percent in October, the least in eight months, the National Bureau of Statistics said yesterday.

11/11/2008 5:07:13 AM