BEIJING (AFP) – Inflation in China fell to 1.6 per cent in September, the government said Wednesday, below analysts’ forecasts and the lowest in the world’s second-largest economy for almost five years.
The consumer price index (CPI) figures released by the National Bureau of Statistics represented a slowdown in year-on-year inflation from 2.0 per cent in August.
It was the lowest since January 2010. Analysts polled by Dow Jones Newswires had predicted 1.7 per cent.
The figures fall well short of the 3.5 per cent annual target set by the government in March, and signal that deflationary pressures are rising.
Moderate inflation can be a boon to consumption as it encourages consumers to buy before prices go up, while falling prices encourage shoppers to delay purchases and companies to put off investment, both of which can weigh on growth.
The latest figures give authorities more room to take steps to stimulate the economy, as statistics suggest that Chinese expansion – which stood at 7.7 per cent last year, maintaining its slowest pace in more than a decade – is weakening.
“China’s soft inflation profile heightens the risk of deflation, thus requiring further monetary policy easing,” ANZ analysts said in a research note.
They attributed the sluggish price increases to the country’s ongoing fight against corruption and a government austerity drive.
“The anti-graft campaign could have significantly eased upward pressures on prices. Notably… the price of tobacco and liquors has dropped to negative territory since September 2013,” they said, referring to arguably the two most popular gifts in the country.
China’s exports and imports both rose more than expected in September, Customs data showed Monday in a positive signal, but analysts warned that fundamentals remained weak.
Industrial production growth slowed sharply in August to its lowest level for more than five years, official data showed last month, while house prices have fallen for five consecutive months.
Officials are targeting economic growth of “about 7.5 per cent” this year, the same as last year’s objective.
The goal is normally exceeded, but senior officials have repeatedly sought to play down its significance this year.
China’s third-quarter gross domestic product figures are due next week.