On a monthly basis, consumer inflation was flat in October, the National Bureau of Statistics said on Monday. That compared with 0.1 percent expected by economists. File pic shows a vendor sells soybean milk at a roadside snack booth in Beijing. - REUTERS
INSTANT View:
BEIJING: China's annual consumer inflation remained near a five-year low of 1.6 percent in October, unchanged from September and adding to concerns that domestic demand remains sluggish despite a raft of stimulus measures.
On a monthly basis, inflation was flat in September, data showed on Monday.
The producer price index fell 2.2 percent in October from a year earlier, versus a 2.0 percent fall expected by economists.
It was the 32nd consecutive decline, highlighting the pressures that Chinese companies are facing as demand cools and putting increasing strains on their finances.
COMMENTARY:
LI HUIYONG, ECONOMIST, SHENYIN & WANGUO SECURITIES, SHANGHAI
"It's in line with our expectations. We think the economy is facing rising downward pressure and deflation risks. The government should put policy priority on stabilizing the economy."
"The worsening PPI weighed on the manufacturing industry, providing more evidence that China's economic growth will under pressure in 2015. Policymakers should take more measures to boost the economy."
LI-GANG LIU, CHIEF ECONOMIST, GREATER CHINA, ANZ, HONG KONG
"As the PPI inflation has remained negative for 32 consecutive months, and the CPI inflation dropped to the lowest level since the global financial crisis, we believe that China has entered into a disinflation process with rising deflation risk."
"The risk of deflation has also risen as the economy is expected to slow further in the next few quarters. In our view, this is a significant risk facing China’s economy, which requires policymakers to monitor the situation closely and take action swiftly. From this perspective, the central bank could conduct liquidity injections via different policy instruments more frequently."
LINKS
For details, see the website of the National Bureau of Statistics at http://www.stats.gov.cn
MARKET REACTION
The CSI300 Index .CSI300 of leading shares in Shanghai and Shenzhen dipped after the inflation data but recovered quickly to be up 1.2 percent, buoyed by news that the landmark Hong Kong-China stock trading scheme would start later this month.
The yuan CNY=CFXS was trading at 6.1152 per dollar.
BACKGROUND
-- The government has set a target for inflation this year of within 3.5 percent, the same as the previous year. Inflation in 2013 was 2.6 percent.
-- Consumer inflation has been benign this year as the economy slows, creating room for the central bank to ease policy to support growth.
-- Top policymakers have issued a steady stream of reassurances about the economy in recent weeks, citing among other things a strong services sector and a still resilient labor market.- Reuters
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