Thursday, February 18, 2016

China Inflation Report: Vegetables Jump, Deflation Elsewhere

No societal pressures there, no siree.
Not really much the government could do though, it was cold and wet.
From the South China Morning Post:

Slump in factory gate prices extends to record length as China’s economy slows
China’s factory gate prices extended their falling streak to 47 months in January, indicating persistent deflationary pressure and fuelling calls for further supportive policies to counter economic headwinds.

Experts said economic deterioration would lag structural adjustment so Beijing should focus more on monetary and fiscal policies to counter downward risks than on supply-side reforms.
Producer prices fell 5.3 per cent in January year on year, smaller than the fall of 5.9 per cent in December, the National Bureau of Statistics said.

But the improvement was largely due to a lower base of comparison – economists said deflationary pressure remained substantial and there were no signs of a quick recovery.

Steel, coal, and non-ferrous sectors have suffered losses across the board with falling prices and weak demand.

Rises in non-performing loans, declines in manufacturing profits, and government efforts to address excess capacity have all added pressure on the economic outlook.

Producer price index deflation was expected to last another two years, as were government efforts to address excess capacity and reduce the number of unsold apartments, said Zhao Yang, chief China economist with Nomura Securities....MORE
And from China Business News:

China CPI Surge, Fueled by Food: Will it Further Stabilize the Economy?
The worst is yet to come for the Chinese economy. Despite tremendous efforts made by Beijing to stabilize it, domestic demand has failed to pick up the pace, worrying policymakers along the way. However, the latest inflation figures have improved, but are not likely to sustain the momentum.
In January, Consumer Price Index (CPI) increased to 1.8% Year-over-Year (YoY), fueled by food prices and seasonal demand, the National Bureau of Statistics (NBS) reported on Thursday. Food prices rose 4.1% YoY, followed by 2.2% growth in services prices. Inflation in cities increased 1.8% YoY, slightly higher than rural areas, where prices rose 1.5%, according to official data....
... However, the latest inflation figures have improved based on seasonal factors, rather than solid sustainable growth factors in the country. Since October last year, food prices in China have been rising due to a supply constraint. The winter season saw a growth in fresh vegetables and transportation being affected adversely, boosting the prices. In January, fresh vegetable prices saw 14.7% rapid growth YoY, owing to an increase in demand coupled with the influence of cold weather in the country....MORE