Econintersect: China’s CPI (Consumer Price Index) was 2.3% in June (year-over-year), down from 2.5% in May and well below the official target of 3.5% set by the government. The reading for June was almost identical to the 2.25% average for the first six months of 2014 and well below the 2.85% average for the second half of 2013 and 2.62% for all of 2013. Food was the main driver of the average price index in June. Fruit prices were up almost 20% from June 2013. Without food, inflation was 1.7% for June 2014 compared to June 2013.
China experienced its 28th consecutive month of PPI (Producer Price Index) deflation in June, but the year-over-year decline remained at 1.1% for the second month in a row. This was the smallest amount of deflation in over two years.
In spite of more than two years of deflating PPI and a continuing domwtrend in CPI, not many economists think deflation is a risk for China. Lu Ting, head of Greater China economics at Bank of America Corp. in Hong Kong is quoted by Bloomberg:
“Deflation is not a threat. [Consumer inflation suggests aggregate demand is still weak and the pace leaves] enough space for additional mini-stimulus measures if they are necessary.”
- Slowing China CPI below annual target (Business with The Wall Street Journal, The Australian, 09 July 2014)
- China PPI Falls at Slowest Pace in Two Years (Xiaoqing Pi, Bloomberg Businessweek, 09 July 2014)
- China Inflation Rate (Trading Economics, 09 July 2014)
- China Producer Prices Change (Trading Economics, 07 July 2014)