BEIJING — Consumer inflation in China slowed more than expected in September, nearly to a five-year low, government data showed on Wednesday, pointing to broad weakness in the economy.
The data, released by the Chinese National Bureau of Statistics, showed that much of the decline was the result of falling prices for food, fuel and other commodities, which are benefiting consumers globally.
The consumer price index rose 1.6 percent in September from a year earlier, the statistics agency said, missing market expectations for a 1.7 percent rise and down from 2 percent in August.
The annual rise was the lowest since January 2010, partly because of a relatively higher base of comparison a year ago, officials said.
Facing mounting risks to growth and rising risks of deflation, Beijing is widely expected to continue rolling out a steady stream of stimulus measures in the coming months, though most economists say they believe it will delay more aggressive action, such as an interest rate cut, unless conditions sharply deteriorate.
“Policy makers in Beijing should begin to be concerned that global disinflationary pressures are spreading to China,” said Dariusz Kowalczyk, senior economist in Hong Kong for Crédit Agricole CIB. “The low inflation readings will open the door to further targeted monetary and fiscal easing. There is also less need for a strong currency to offset imported inflation.”
Inflation is also easing in other parts of Asia, including South Korea, whose economy is also sputtering and facing growing fears of deflation. Highlighting the increasing strains on companies in China, the producer price index fell 1.8 percent, its 31st consecutive monthly decline, reflecting lower oil and steel prices.
The market had expected a 1.6 percent fall in producer prices after a drop of 1.2 percent in August. Weakening demand is not only limiting companies’ pricing power and cutting into their profit margins but putting increasing strains on their balance sheets and ability to pay back debts, posing a growing threat to the banking system.
The Zoomlion Heavy Industry Science and Technology Company, a Chinese maker of construction machinery, said on Tuesday that it expected third-quarter net income to fall as much as 90 percent on continued weakness in the market.
With inflation well below the official annual target of 3.5 percent, Chinese policy makers have ample room to announce more stimulus, on top of a flurry of steps this year. Further attempts by the central bank on Tuesday to keep market interest rates relatively low also suggest that the authorities may be content to take a measured response for now.
The consumer price index rose 0.5 percent in September from the previous month, versus a 0.4 percent gain expected by economists.
“The low inflation readings suggest rising risks of deflation in China due to weak domestic demand,” HSBC economists said. “It confirms our view that risks to growth are still on the downside, and further policy easing measures are needed.”
But as Japan and many Western countries have found, simply injecting a mountain of money into the system may have a limited effect on the real economy if demand is too weak to absorb it and banks remain reluctant to lend.
Wang Jun, senior economist at China Center for International Economic Exchanges, a Beijing-based research group, believes that the central bank is more likely to free up money for loans by cutting all banks’ reserve requirement ratio — or R.R.R. — to support growth.
“Cutting R.R.R. in the fourth quarter is possible, but it cannot be seen as full-flown policy loosening,” Mr. Wang said. “The possibility of cutting R.R.R. is far bigger than cutting interest rates, which is seen as a strong stimulus.”
The inflation data also showed further downward pressure from the cooling housing market, which economists say is the biggest single risk facing China’s economy. Premier Li Keqiang said this month that the Chinese economy would avoid a hard landing despite worries about the real estate market.
Mr. Li also said he was confident that the economy would continue to grow at a “medium to high tempo,” forecasting growth of about 7.5 percent this year, which appears sharply at odds with the low inflation figure.
The latest Reuters poll of economists suggested that China’s economy probably grew 7.2 percent in the third quarter from a year earlier, its weakest pace in more than five years, as the property downturn weighed on demand.
nytimes.com
The data, released by the Chinese National Bureau of Statistics, showed that much of the decline was the result of falling prices for food, fuel and other commodities, which are benefiting consumers globally.
The consumer price index rose 1.6 percent in September from a year earlier, the statistics agency said, missing market expectations for a 1.7 percent rise and down from 2 percent in August.
The annual rise was the lowest since January 2010, partly because of a relatively higher base of comparison a year ago, officials said.
Facing mounting risks to growth and rising risks of deflation, Beijing is widely expected to continue rolling out a steady stream of stimulus measures in the coming months, though most economists say they believe it will delay more aggressive action, such as an interest rate cut, unless conditions sharply deteriorate.
“Policy makers in Beijing should begin to be concerned that global disinflationary pressures are spreading to China,” said Dariusz Kowalczyk, senior economist in Hong Kong for Crédit Agricole CIB. “The low inflation readings will open the door to further targeted monetary and fiscal easing. There is also less need for a strong currency to offset imported inflation.”
Inflation is also easing in other parts of Asia, including South Korea, whose economy is also sputtering and facing growing fears of deflation. Highlighting the increasing strains on companies in China, the producer price index fell 1.8 percent, its 31st consecutive monthly decline, reflecting lower oil and steel prices.
The market had expected a 1.6 percent fall in producer prices after a drop of 1.2 percent in August. Weakening demand is not only limiting companies’ pricing power and cutting into their profit margins but putting increasing strains on their balance sheets and ability to pay back debts, posing a growing threat to the banking system.
The Zoomlion Heavy Industry Science and Technology Company, a Chinese maker of construction machinery, said on Tuesday that it expected third-quarter net income to fall as much as 90 percent on continued weakness in the market.
With inflation well below the official annual target of 3.5 percent, Chinese policy makers have ample room to announce more stimulus, on top of a flurry of steps this year. Further attempts by the central bank on Tuesday to keep market interest rates relatively low also suggest that the authorities may be content to take a measured response for now.
The consumer price index rose 0.5 percent in September from the previous month, versus a 0.4 percent gain expected by economists.
“The low inflation readings suggest rising risks of deflation in China due to weak domestic demand,” HSBC economists said. “It confirms our view that risks to growth are still on the downside, and further policy easing measures are needed.”
But as Japan and many Western countries have found, simply injecting a mountain of money into the system may have a limited effect on the real economy if demand is too weak to absorb it and banks remain reluctant to lend.
Wang Jun, senior economist at China Center for International Economic Exchanges, a Beijing-based research group, believes that the central bank is more likely to free up money for loans by cutting all banks’ reserve requirement ratio — or R.R.R. — to support growth.
“Cutting R.R.R. in the fourth quarter is possible, but it cannot be seen as full-flown policy loosening,” Mr. Wang said. “The possibility of cutting R.R.R. is far bigger than cutting interest rates, which is seen as a strong stimulus.”
The inflation data also showed further downward pressure from the cooling housing market, which economists say is the biggest single risk facing China’s economy. Premier Li Keqiang said this month that the Chinese economy would avoid a hard landing despite worries about the real estate market.
Mr. Li also said he was confident that the economy would continue to grow at a “medium to high tempo,” forecasting growth of about 7.5 percent this year, which appears sharply at odds with the low inflation figure.
The latest Reuters poll of economists suggested that China’s economy probably grew 7.2 percent in the third quarter from a year earlier, its weakest pace in more than five years, as the property downturn weighed on demand.
nytimes.com
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