CHINA PRODUCER PRICES CONTINUE SLUMP

Producers' prices mired in slump

Friday, September 11, 2015

China's manufacturers slashed prices at the fastest rate in six years in August as commodity prices fell and demand cooled, signaling stubborn deflation risks in the economy and adding to expectations for further stimulus measures.The producer price index fell 5.9 percent in August from the same period last year, its 42nd consecutive month of decline and the biggest drop since the depths of the global financial crisis in late 2009, data showed on Thursday.
"The change in PPI is very worrying. It could affect corporate profitability, which in turn could affect consumption and the economy," said Li Huiyong, an economist at Shenyin & Wanguo Securities.
"We must step up policy support." The consumer price index rose 2 percent from a year earlier to a one-year high last month, the National Bureau of Statistics said, but the gain was due largely to soaring food prices, not an improvement in economic activity.
Indeed, non-food inflation remained subdued at 1.1 percent, unchanged from July. "The risk for China is still deflation, not inflation. PPI deflation will eventually filter down to affect CPI, and aggregate demand will continue to be weak," said Kevin Lai, chief economist Asia Ex-Japan at Daiwa, adding his firm had just cut its 2016 CPI forecast to -0.5 percent from 0.5 percent.
REUTERS