China's Consumer Price Index (CPI), a main gauge of inflation, has eased to a 29 month low driven by falling food prices, leaving the government ample room to introduce more pro-growth measures to boost the slowing economy.
The CPI grew 2.2% year-on-year in June, the slowest pace since January 2010, according to China's National Bureau of Statistics (NBS) announced. It eased from May's 3 percent and April's 3.4 percent.
In the first six months of 2012, the CPI climbed 3.3% compared with the same period of last year year.
Food prices, which account for nearly one-third of the weighting in the calculation of China's CPI, increased 3.8% last month from one year earlier, down from 6.4% in May. According to the NBS, pork prices fell 12.2% year-on-year in June, eggs declined 3.6%, while vegetable prices increased 12.1% due to ongoing rain in China.
In addition to food prices, easing wholesale prices at the factory gate due to over-capacity in a few industries and waning imported inflation also explained the slowing CPI.
The Producer Price Index (PPI), a main gauge of inflation at the wholesale level, fell 2.1% in June from a year earlier. It was lowest since December 2009.
Commodity prices like crude oil and iron ore moved mildly this year, as the prolonged debt crisis in the Eurozone and the sluggish world economy.
The trends will continue in the second half of this year, keeping China's CPI away from effects of the imported inflation. While the slowing CPI bodes well for consumers, it ignited fears of deflation.
