Stockholm (Ekonamik) – On Sunday, March 10, the National Bureau of Statistics of China announced that consumer and producer prices had grown at a year-on-year rate of 1.5% and 0.1%, respectively.
Yearly consumer price inflation was down from the 1.7% measured in January. Producer price inflation was constant vis-a-vis January. Both measures of price inflation are trending down since September and June 2018, respectively.
According to the press releases, “prices of food, tobacco and liquor went up by 1.2% year-on-year, affecting nearly 0.37 percentage point increase in the CPI. (…) The price of transportation and communication decreased by 1.2%.”
The figures are consistent with the view that the Chinese economy is slowing down, a reality that Chinese officials recognised at the recent 13th National People’s Congress. As this reality sunk in, officials announced policies to stimulate the Chinese economy, including aid to farmers affected by the trade war with the USA and a VAT reduction to stimulate consumption.
“Following the announcement of several kinds of measures to boost economic growth, many had hoped for the January/February hard economic data to show signs of a growth rebound, but that did not turn out to be the case. (…) At best, growth has been stable in the first two months of 2019. Fixed investment growth performed best by increasing from 5.9% y-o-y in December to 6.1% y-o-y in January/February. This masks lower growth of investments by industrial companies but higher real estate investments,” said Bjarke Roed-Frederiksen, Senior Economist for Latin America and China at Handelsbanken Capital Markets in a note.
However, the economist was optimistic about China’s future, concluding his comment by stating “growth should rebound somewhat in Q2”. Both this slowdown as well as the expected rebound in 2019 are consistent with the picture painted in January by Paul Diggle, Senior Economist at Aberdeen Standard Investments.
Picture from Pixabay
