China: Consumer Inflation Stays Low, Producer Prices Continue Deflation

Econintersect:  China’s CPI (Consumer Price Index) for August has declined from the June and July level of 2.3% to 2.0% year-over-year.  Wholesale inflation PPI (Producer Price Index) shrank by 1.2% (y-o-y), the 30th consecutive month of decline.  Within the PPI, the cost of consumer goods produced rose by 0.2%, while the costs of raw materials contracted by 1.7%.  BBC suggested that the continued decline in PPI was the result of excess capacity.  The official comment from the government via Xinhua was that “the data marked existing pressures from slowing economic growth in the country“.

The recent pattern for CPI has been stable.  The most recemt six months averaged 2.2% annual inflation; the six months belfore that averaged 2.6%; the 12 months before that, 2.3%.

The recent trend for PPI has been toward a moderation of deflation, both over the last six months (first graph below) and over the last two years (second graph).

John Lounsbury

Sources:

• China’s August PPI down 1.2 pct (Xiang Bo, Xinua, 11 September 2015)

• China’s inflation cools to four-month low (BBC News, 11 September 2014)

• China Inflation Rate (Trading Economics, 11 September 2014)

• China Producer Prices Change (Trading Economics, 11 September 2014)