Inflation in China fell to 1.6 per cent in September, below analysts’ forecasts and the lowest in the world’s second-largest economy for almost five years.
The consumer price index (CPI) figures released by the National Bureau of Statistics on Wednesday,represented a slowdown in inflation from 2.0 per cent in August.
It was the lowest since January 2010. Analysts polled by Dow Jones Newswires had predicted 1.7 per cent.
The figures fall well short of the 3.5 per cent annual target set by the government in March, and signal that deflationary pressures are rising.
Moderate inflation can be a boon to consumption as it encourages consumers to buy before prices go up, while falling prices encourage shoppers to delay purchases and companies to put off investment, both of which can weigh on growth.
The latest figures give authorities more room to take steps to stimulate the economy, as statistics suggest that Chinese expansion – which stood at 7.7 per cent last year, maintaining its slowest pace in more than a decade – is weakening.
“China’s soft inflation profile heightens the risk of deflation, thus requiring further monetary policy easing,” ANZ analysts said in a research note.
China’s exports and imports both rose more than expected in September, Customs data showed on Monday in a positive signal, but analysts warned that fundamentals remained weak.
Industrial production growth slowed sharply in August to its lowest level for more than five years, official data showed last month, while house prices have fallen for five consecutive months.
Officials are targeting economic growth of “about 7.5 per cent” this year, the same as last year’s objective.
The goal is normally exceeded, but senior officials have repeatedly sought to play down its significance this year.
China’s third-quarter gross domestic product figures are due next week.
Last week the World Bank cut its forecast for Chinese growth to 7.4 per cent for 2014 and 7.2 per cent for 2015. The International Monetary Fund left its predictions unchanged at 7.4 per cent and 7.1 per cent but warned of “near-term growth risks”, especially in real estate.
China’s vast and crucial property sector is struggling in the face of oversupply.
A sharp slowdown in food price increases, from 3.0 per cent in August to 2.3 per cent in September, drove the inflation decline, the NBS said.
The producer price index (PPI) – a measure of costs for goods at the factory gate and a leading indicator of the trend for CPI – fell 1.8 per cent year-on-year in September, the NBS said separately.
The last PPI increase was in January 2012, when it rose 0.7 per cent.
