The pace of
Chinese inflation unexpectedly picked up in February, but producer
prices continued to slide, underscoring the intense pressure on profit
margins at Chinese companies and adding urgency to policymakers' efforts
to find new ways to support growth.
The producer price index (PPI) declined 4.8 percent in February, the National Bureau of Statistics said on Tuesday - the most negative reading posted since Oct 2009 - extending a long-running factory deflation cycle that began in 2012 to nearly three years.
Economists and policymakers worry that the risk of deflation is rising for the world's second-largest economy, as drag from a property market downturn and widespread factory overcapacity is compounded by an uncertain global outlook and soft commodity prices.
China's statistics bureau attributed the 1.4 percent rise in consumer prices to higher costs for vegetables and fruit, while the decline in PPI - which analysts had expected to come in at minus 4.3 percent - was blamed on sliding prices for global commodities, in particular energy, which have undermined profitability at China's industrial heavyweights.
"February's
seasonal pick-up in food inflation will likely prove short-lived and we
still expect inflation to fall back below 1 percent in coming months,"
wrote Julian Evans-Pritchard of Capital Economics in Singapore.
"Nonetheless, today's inflation data suggest that downward pressure on
broader prices has begun to ease."
But some economists questioned the significance of the price rise, saying it was disappointing in the context of Lunar New Year, and noted there was no significant increase in the price of pork, which usually rises around the week-long festival.
"We continue to expect inflation to remain relatively low and still see disinflationary pressures in the economy," wrote Nomura economists in a research note after the news.
"To offset headwinds to economic growth, we expect monetary policy to be loosened further."
The question is how long it will take for easing measures to take effect. The issue is becoming more pressing because unemployment, which has remained comfortably low even in the face of a weakening economy, is seen as coming under further pressure, the social security minister said on Tuesday.
Chinese stock markets were down slightly after the news, dragged by financials, with the CSI300 index .CSI300 down 0.5 percent in morning trade. The yuan CNY=CFXS firmed slightly against the dollar to 6.2623.
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| A customer selects products at a supermarket in Shanghai. |
The producer price index (PPI) declined 4.8 percent in February, the National Bureau of Statistics said on Tuesday - the most negative reading posted since Oct 2009 - extending a long-running factory deflation cycle that began in 2012 to nearly three years.
Economists and policymakers worry that the risk of deflation is rising for the world's second-largest economy, as drag from a property market downturn and widespread factory overcapacity is compounded by an uncertain global outlook and soft commodity prices.
China's statistics bureau attributed the 1.4 percent rise in consumer prices to higher costs for vegetables and fruit, while the decline in PPI - which analysts had expected to come in at minus 4.3 percent - was blamed on sliding prices for global commodities, in particular energy, which have undermined profitability at China's industrial heavyweights.
But some economists questioned the significance of the price rise, saying it was disappointing in the context of Lunar New Year, and noted there was no significant increase in the price of pork, which usually rises around the week-long festival.
"We continue to expect inflation to remain relatively low and still see disinflationary pressures in the economy," wrote Nomura economists in a research note after the news.
"To offset headwinds to economic growth, we expect monetary policy to be loosened further."
The question is how long it will take for easing measures to take effect. The issue is becoming more pressing because unemployment, which has remained comfortably low even in the face of a weakening economy, is seen as coming under further pressure, the social security minister said on Tuesday.
Chinese stock markets were down slightly after the news, dragged by financials, with the CSI300 index .CSI300 down 0.5 percent in morning trade. The yuan CNY=CFXS firmed slightly against the dollar to 6.2623.
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