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China’s slowing factory prices add to deflation concerns

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China's factory inflation decelerated for the seventh month in a row on softening demand and high year-ago basis.

[BEIJING] China's factory inflation decelerated for the seventh month in a row on softening demand and high year-ago basis.

The producer price index rose 0.1 per cent in January from a year earlier, while the consumer price index rose 1.7 per cent, according to the National Bureau of Statistics. That compares to estimates of 0.3 per cent and 1.9 per cent respectively

The moderating factory prices raise the prospect of a return of the deflation seen between 2012 and 2016 which depressed corporate earnings

With a continued slowdown in industrial output and consumption, a further deceleration in China's economy will hurt demand for imported goods

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Market voices on:

The nation's economy could slow for another three to four quarters, Larry Hu, head of China economics at Macquarie Securities wrote in a recent note. "2019 could see the return of PPI deflation and negative earnings growth."

A Bloomberg tracker of China's PPI indicated a 0.3 per cent producer-price fall from a year earlier in January

The prices of global commodity futures fell from a year earlier in January, but rose from December, according to the Bloomberg Commodity Spot Index.

BLOOMBERG