Chinese prices ease rate of decline

Prices in China fell less sharply last month than in April, official data showed on Wednesday, fuelling hopes that the government’s Rmb4,000bn ($586bn) stimulus measures are beginning to help ease deflationary pressures.

The consumer price index fell 1.4 per cent last month from a year earlier, compared with a 1.5 per cent decline in April, marking the fourth straight month of falling prices. On a month-on-month basis, the National Bureau of Statistics said the CPI dropped 0.3 per cent from April’s level.

The decline in food prices eased significantly, from 1.3 per cent in April to 0.6 per cent in May. Prices of non-food items, however, fell 1.7 per cent last month, more than April’s 1.5 per cent.

China’s property market showed signs of stabilising in May. According to the National Development and Reform Commission, property prices in 70 cities fell 0.6 per cent in May from a year earlier, compared with a 1.1 per cent decline in April. On a month-on-month basis, prices rose 0.6 per cent from April.

However, the producer price index, which measures prices paid at the factory gate, fell 7.2 per cent in May. This was sharper than the 6.6 per cent fall in April.

Economists expected prices to continue falling until later this year but generally thought that the worst of the deflationary pressure had passed.

“The economy has begun to recover since last December. We think inflation will be back in the fourth quarter,” said Zhu Jianfang, chief economist at Citic Securities in Beijing.

“Concerns about deflation are receding as global commodity prices rise and economic indicators generally point to improving fundamentals,” said Jing Ulrich, managing director and chairman of China Equities at JPMorgan.

“The positive wealth effect from the recovery in stock and property prices should lend support to urban household consumption going forward.”

China has targeted headline inflation of 4 per cent this year.

• In Japan, producer prices fell 5.4 per cent in May, the sharpest decline since March 1987. The latest data from the Bank of Japan raised concerns that companies there were still withholding orders due to weak demand.

Courtesy: Financial Times