CPI posts decline again in May

By Joy Wang  |   2009-6-16  |     NEWSPAPER EDITION

SHANGHAI'S consumer price index fell 1.2 percent from a year earlier in May, said the Shanghai Statistics Bureau yesterday.

Despite the CPI falling for the fourth month in a row, analysts forecast deflationary pressure in the city may subside in the second half of this year - in line with the national trend.

May's decline in the city's CPI, the main gauge of inflation which measures the cost of living, followed decreases of 1.4 percent in April, 0.4 percent in March and 0.2 percent in February.

Apparel prices dropped 1.2 percent last month from a year earlier while costs of transport and communications fell 2.9 percent. The prices of health care also declined 1.2 percent while rental fees fell 5.6 percent.

Food prices, which were among the two categories posting growth, gained 0.9 percent in May while the cost of household appliances rose 3.6 percent.

"The contraction of CPI indicates the city still faces economic difficulties ahead," said Liu Hui, an analyst with the bureau. "However, it seems the falling prices did not deter people's willingness to spend and the pressure of deflation may ease in the coming months in line with the national trend because of the soaring prices in the global market."

Deflation is considered harmful to the economy because people may delay spending, hoping prices will drop further.

Shanghai's retail sales in May posted an increase of 12.4 percent from a year earlier, slowing from the 13.8 percent expansion recorded in April.