China inflation takes a tumble
February 10, 2015
China logged a mere 0.8 percent rise in the consumer price index in January year-on-year, the National Bureau of Statistics reported Tuesday, fueling fears the world's second-largest economy could be on the brink of a deflationary spiral.
The new data came on the back of a 1.5-percent inflation rate in December, marking the lowest level since the 0.6 percent posted in November 2009.
While moderate inflation is widely regarded as a boon to consumption, encouraging people to buy before prices go up, falling prices tend to prompt shopper s to delay purchases and companies to put off investment. Both developments can potentially hurt growth.
Central bank action required?
Throughout 2014, the consumer price index was 2 percent, down from 2.6 percent in 2013 and well below the Chinese government's target of about 3.5 percent.
"The weak profile suggests that deflation has become a real risk for China, thus paving the way for further monetary policy easing," ANZ economists Liu Ligang and Zhou Hao said in a research note.
The statistics office attributed January's low inflation rate first and foremost to retreating food prices and falling oil prices.
"If consumption cools down [because of low inflation] while investment struggles to rebound, the economy will face even more trouble," China Merchants Bank analyst Liu Dongliang told AFP news agency.
hg/uhe (AFP, AP, dpa)