Source: DAILY TELEGRAPH
China suffers deflation for third month in a row
China's inflation rate fell for the third month in a row in April as prices
for foods and energy plunged from high levels the year before.
AP
Last Updated: 8:11AM BST 11 May 2009
The consumer price index, which is heavily weighted toward food items, fell
1.5pc in April from a year earlier after declining 1.2pc in March and 1.6pc
in February, the National Statistics Bureau reported on Monday.
Food prices fell 1.3pc, with prices for meat falling 13.5pc, the bureau said
in a statement on its website.
A key factor then was shortages of pork due to an outbreak of blue ear
disease. The ailment, also known as porcine reproductive and respiratory
syndrome, killed hundreds of thousands of pigs before it was brought under
control.
The outbreak caused farmers to stop raising pigs because of worries they would
become infected. That sent the price of pork — China's staple meat — sharply
higher.
In April, pork prices plunged 28.6pc, the Statistics Bureau said.
Meanwhile, it reported that producer prices fell 6.6pc in April from a year
earlier, compared with 6pc in March, due largely to lower energy costs.
Overall, costs for fuel and raw materials fell 9.6pc in April, the report
said.
While a protracted bout of deflation would be unwelcome, April's decline was
expected. The data dovetailed with the upbeat mood that has prevailed
recently on China's stock exchanges, helping push the benchmark Shanghai
Composite Index up 0.2pc to 2,652.15 by midday on Monday.
Deflation is expected to persist for several months due to excess inventory in
many industries amid the global economic downturn. Sharp declines in crude
oil prices and costs for other commodities will ensure that.
But signs of economic recovery in China suggest a reduced risk for a prolonged
bout of lower prices that could drag growth lower if consumers put off
purchases in expectation of lower prices, forcing companies to cut wages and
investment, economists say.
The government has pumped billions of dollars into construction projects and
other spending aimed at stimulating demand and propping up growth. Recent
improvements in manufacturing, auto sales and real estate transactions are
seen as evidence the strategy has begun to work, despite persistently weak
demand for Chinese exports in overseas markets.
"Deflationary concerns appear to be subsiding as the economy shows signs of
recovery," Jing Ulrich, chairwoman for China equities at JP Morgan said in a
report to clients.
