China鈥檚 December CPI up 1.5%
Print Edition
CHINA’S consumer inflation edged up unexpectedly in December despite a slump in oil prices but still remained below the official target.
The Consumer Price Index, the main gauge of inflation, grew 1.5 percent from a year earlier last month, according to the National Bureau of Statistics yesterday.
The CPI accelerated slightly from the pace of 1.4 percent in November, and brought inflation for 2014 at 2 percent, lower than the government target of 3.5 percent.
Chang Jian, an economist at Barclays, said the December inflation picked up surprisingly toward the year-end, mostly driven by food prices.
Food prices, which account for nearly one-third in the CPI inflation basket, rose 2.9 percent annually. The non-food sector saw a year-on-year rise of 0.8 percent in prices.
Zhou Hao, an economist at Australia & New Zealand Banking Group Ltd, also said China’s CPI remained subdued.
“We believe the authorities need to be vigilant about the rising risk of deflation,” Zhou said. “In addition to monetary policy response, this could be a good opportunity to push forward pricing reform for water, energy and utility.”
Crude oil prices have fallen over 50 percent since June to a near six-year low of under US$50 a barrel.
Meanwhile, China’s Producer Price Index, the factory-gate measurement of inflation, fell 3.3 percent year on year in December, down further from the fall of 2.7 percent in November.
In 2014 as a whole, the PPI lost 1.9 percent.
The PPI has been in deflationary territory for 34 months in a row.
“Chinese authorities will need to use both structural reform measures as well as monetary policy tools to head off the risk of deflation, especially when domestic demand remains weak and commodity and energy prices continue to fall,” Zhou said.
“We therefore believe that more monetary easing measures, including reserve requirement ratio cuts, can be expected in the first quarter of 2015.”
Zhu Haibin, chief economist for China at JP Morgan, said his bank will “maintain our 2015 forecast of CPI at 1.5 percent, but lower our PPI forecast to a negative 2.4 percent from the previous negative 1.5 percent.”
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