BEIJING: China said Wednesday consumer inflation eased slightly in April as food prices fell, but analysts warned Beijing is still under pressure to rein in rising costs.
China's consumer price index rose 5.3 percent year on year in April -- a slight easing from March but well above Beijing's official four percent target for 2011.
The politically-sensitive inflation reading had widely been expected to slow from a 32-month high of 5.4 percent in March, mainly on the back of falling vegetable prices caused by increased supply.
But economists say they nevertheless expect prices to remain high and peak around mid-year, even as anxious leaders in Beijing try to rein in rising costs of food, housing and other essentials.
The CPI was higher than the median forecast of 5.2 percent in a Dow Jones Newswires poll of 14 economists.
"The general rising trend of CPI has been initially contained and government measures to control prices had initial positive effects," Sheng Laiyun, spokesman for the National Bureau of Statistics (NBS), told reporters.
But he warned: "Even though the trend has been initially contained, CPI is still under rather big pressure due to the situation in the country and abroad."
Hong Kong and Shanghai shares fell as the data raised the prospect of further monetary tightening. The benchmark Hang Seng Index dropped 0.19 percent, while the Shanghai Composite Index closed down 0.25 percent.
Sheng said the fall in consumer inflation was mainly due to an 11.2 percent drop in vegetable prices from March, thanks to a surge in supply that nudged overall food prices down 0.4 percent from the previous month.
"The micro-tuning of the economy has kicked in but it has yet to achieve its goal," Li Huiyong, an analyst at Shenyin Wanguo Securities, told AFP.
Inflation had hit 5.0 percent for the first quarter.
"Inflation has taken a measured step back, retreating from March's 32-month peak, sending out a strong signal that inflation is, or near, peaking," said Beijing-based IHS Global Insight economist Alistair Thornton.
"The broad message is this slight pullback far from signals the end of China's inflationary concerns. It's clear this is still a key policy priority," Thornton told AFP.
The International Monetary Fund has forecast China's inflation should fall to just above four percent by the end of the year on the back of Beijing's tough tightening policies.
Interest rates have been hiked four times since October and the central bank has increased on numerous occasions lenders' reserve requirement ratio, which effectively limits the amount of money they can loan out.
"The most pressing problem we are facing right now is the problem of inflation," Chinese Vice Premier Wang Qishan said in a US television interview broadcast earlier this week during high-level Sino-US talks in Washington.
Wang pledged that Beijing would use monetary policy, fiscal policy and economic restructuring to fight soaring prices.
"A combination of yuan appreciation, bank reserve ratio increases and rate hikes will all be required to tame inflation and money supply growth," Moody's Analytics economist Matthew Circosta said in a research note.
In April, Premier Wen Jiabao made a rare pledge to increase the flexibility of the yuan's exchange rate to ease price pressures, suggesting top leaders were willing to accept a stronger currency to bring down domestic prices.
The potential for spiralling inflation to spark unrest was highlighted last month when hundreds of truckers went on strike at port facilities in Shanghai over rising fuel costs, prompting a heavy police response to restore calm.
Output from the country's millions of factories and workshops expanded by 13.4 percent on-year in April, the NBS said.
Retail sales, the main gauge of consumer spending in the world's second-largest economy, rose 17.1 percent in April from a year ago.
New loans issued by China's banks went up slightly in April from the previous month, the central bank said Wednesday, as banks made 739.6 billion yuan ($113.8 billion) in new loans in April, the People's Bank of China said.
Fixed asset investment, a measure of government spending on infrastructure, rose 25.4 percent in the first four months of 2011, compared with the same period a year earlier.
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