Deflationary pressures to continue ‘haunting China’s economy’ this year: economists
With the exception of rising food prices, there were few other signs of momentum last month to hope for a major economic turnaround in 2016
China’s consumer inflation barely edged up as food prices rose last month, while prices of manufacturing goods remained weak, official data showed.
The consumer price index rose (CPI) 1.6 per cent in December from a year earlier, up slightly from November’s 1.5 per cent, the National Bureau of Statistics said yesterday. Last month’s inflation rate was driven by rising food prices – 2.3 per cent for fresh frut and 13.7 per cent for fresh vegetables.
For the whole year, the CPI rose 1.4 per cent compared with 2014, which was also affected by higher food prices. Pork prices jumped year on year by 9.5 per cent and fresh vegetables went up 7.4 per cent last year.
The producer price index fell 5.9 per cent from a year earlier, extending declines to a record 46 months, due to overcapacity in many industrial sectors. Producer prices dropped 5.2 per cent in 2015 from the previous year.
“The CPI remains considerably below the government’s target of 3 per cent for 2015 and is set to stay low heading into 2016,” said Tom Orlik, chief Asia economist at Bloomberg LP in Beijing. “China’s structural challenges remain formidable.”
Consumer inflation continued to fall, staying below 2 per cent since August. The mild inflation has given policymakers room to loosen monetary policy as the People’s Bank of China, the central bank, cut interest rates six times since November, 2014 to stimulate growth amid the persistent slowdown.
The official purchasing managers’ index, or PMI, released last week, also suggested China’s manufacturing sector continued to contract for a fifth straight month in December. Reports also suggested that manufacturers continued to shed jobs, dampening hopes for a recovery for the world’s second largest economy this year. China has been the chief driver of global growth since the 2008 global financial crisis, and any slowdown in the world’s fast growing major economy would have a similar negative impact on global growth.