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Prices indices reflect deflation threats

By Wang Xu (chinadaily.com.cn)
Updated: 2009-02-10 10:46

Copper products are on display at a non-ferrous metals exhibition in Shanghai, Oct 16, 2008. China's producer price index in January registered a negative growth of 3.3 percent from a year earlier, the steepest decline in eight years.[Asianewsphoto]

China's producer price index in January registered a negative growth of 3.3 percent from a year earlier, the steepest decline in eight years, the National Bureau of Statistics (NBS) said this morning.

Related readings: Consumer price index up 1.0% in Jan China's CPI rises 5.9% in 2008 Stable prices predicted for H1 2009

The January consumer price index declined to an annualized rate of 1.0 percent. The index has dropped for 9th consecutive months.

The decline of producer prices is largely due to the drop in commodity prices, the NBS said in a statement. It said international metal prices plummeted 41.4 percent in January year-on-year.

"China's CPI inflation is likely to dip into negative territory in coming months due to the high base in early 2008, when food and commodity prices were surging and severe winter snowstorms brought disruptions to agricultural and industrial activity," said Jing Ulrich, managing director and chairwoman of China Equities at JP Morgan.

"We anticipate further interest rate cuts from the central bank in the coming months, especially considering the recent rise in real interest rates," said Ulrich.

The central bank has cut the key one-year lending rate by 2.16 percentage points to 5.31 percent since 2008, as the government decided to ease monetary policy to bolster the economy.