Econintersect: China is now having the problem of many of the world's most advanced economies: Consistently failing to reach modest consumer inflation targets. And the Middle Kingdom is experiencing something that their more mature cousins are not (yet): persistent producer price deflation. The National Bureau of Statistics of China has reported CPI (Consumer Price Index) data for September with a 1.6% increase year-over-year. This is down from 2% in August and slightly lower than the 1.7% expected. The PPI (Producer Price Index) was -1.8% y-o-y, the second month reversing a five-month trend of moderating deflation which had reached a high point of -0.9% in July. The August producer price change from a year ago was -1.2%.
Trading Economics provided the two graphs displayed below. The inflation rate in September was the lowest seen since January 2010, the start of the recovery from the Great Recession.
The Producer Price Index has been contracting year-over-year for 30 consecutive months. The trend since 2Q 2012 has been for gradual improvement of the deflation but now August and September have provided the steepest two month decline since 1Q 2013. The next two months will be critical in determining if the moderation can continue of if a new trend will have to be established.
- China CPI grows less than expected (fast FT, 15 October 2014)
- Asia edgy on lingering growth anxiety, China inflation slows (Shinichi Saoshiro, Reuters, 14 October 2014)
- China Inflation Rate (Trading Economics, 15 October 2014)
- China Producer Prices Change (Trading Economics, 15 October 2014)