China's inflation rate at 6.1% in September, down from 6.2% in August but well above government's 4% target

BEIJING , October 14, 2011 () – China's inflation rate edged lower in September, giving Chinese leaders leeway to stimulate the economy as U.S. and European growth slows.

Consumer prices rose 6.1 percent, down from August's 6.2 percent but well above the government's 4 percent target for the year, data showed Friday. Food price inflation held steady at August's level of 13.4 percent.

Lower inflation will give Beijing room to stimulate the economy if needed by reversing lending curbs and other controls imposed over the past year to steer rapid growth to a more sustainable level and cool price rises. Inflation peaked at a 37-month high of 6.5 percent in July and is expected to ease further as the autumn harvest comes in.

"Inflation is in retreat," said IHS Global Insight analyst Alistair Thornton. "Should developments in the eurozone take a turn for the worse, then it's clear the government will start to aggressively loosen monetary policy."

China's economy is forecast by the World Bank to grow by a relatively robust 9.3 percent this year. But it faces a possible impact from weak U.S. and European demand that caused an unexpectedly sharp decline in September export growth. Exports to the 27-nation European Union, China's biggest trading partner, dropped 9.7 percent from a year earlier.

China rebounded quickly from the 2008 global crisis on a flood of government spending and bank lending. But that money coursing through the economy fueled price rises, prompting the government to clamp down on lending.

Beijing has begun to loosen some curbs, promising this week that state banks will lend more to small companies that have been hurt by lack of credit. Some have been driven into bankruptcy and others turned to high-interest underground lenders.

Last weekend, regulators lowered state-set prices for gasoline and diesel by about 3.5 percent in line with declines in global crude costs.

"Rapid increases in food prices, excessive credit growth, and elevated property prices, which had fueled inflation earlier this year, are all showing signs of moderation," said Jing Ulrich, JP Morgan's chairwoman for China equities, in a report. "Policy focus will shift to maintaining steady GDP growth and employment."

Inflation has been largely driven by food costs due to shortages of pork, vegetables and other basic items. The government has launched measures to increase supplies but those have been set back by summer storms that wrecked crops.

High living costs are politically dangerous for China's communist leaders because they erode economic gains that underpin the ruling party's claim to power.

"Nowadays, only the ones who are better off eat meat and poorer people are only able to eat very little meat," said Gu Weiming, a butcher in Beijing.

September price rises were driven by a 43.5 percent jump in the price of pork, a 14.2 percent increase for eggs and 11.9 percent for grain.

China's export growth fell to 17.1 percent in September from August's 24.5 percent, customs data showed Thursday. Weaker sales have prompted many small exporters to cut staff or close outright, raising the specter of widespread job losses and possible social tensions.

National Bureau of Statistics (in Chinese):

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