10-JUNE-09: CPI inflation rate in China at -1.4 per cent in April 2009

The monthly CPI inflation rate for May 2009 decreased, now for the fourth consecutive month, said the National Bureau of Statistics in China, thereby deepening the deflationary stance of the economy this year. But much of the deflation comes from the fact that y-o-y rates are against the high inflation months of 2008. Inflation rates in February, March, April and May last year averaged 8.3 per cent.

Therefore, it is still not to be expected to have persistent deflation over the medium term. Much more so, as the financial and monetary stimulus will come to full effect in the coming months. Expectations are that positive CPI inflation will be realised again as early as inthe first quarter, more likely still in the fourth quarter 2009, I think.

11-MAY-09: CPI inflation rate in China at -1.5 per cent in April 2009

The National Bureau of Statistics in China announced today that the monthly CPI inflation rate for April 2009 decreased, now for the third consecutive month. The deflationary stance of the economy thus deepened again after a slight relief in March, when prices eased by -1.2 per cent compared to  -1.6 per cent in February.

But in fact a huge part of the recent drops in inflation rates has to be credited to the fact that y-o-y rates are against the high inflation months of 2008. Inflation rates in February, March and April last year were at 8.7 per cent, 8.3 per cent and 8.5 per cent, respectively. So, it is not to be expected to have persistent deflation over the medium term. Much more so, as hopes are high for the financial and monetary stimulus to take off in the coming months. First signs of recovery from deflation should therefore become clear as early as in the fourth quarter 2009.

16-APR-09: CPI inflation rate in China at -1.2 per cent in March 2009

The National Bureau of Statistics in China announced that the monthly CPI inflation rate for March 2009 decreased by -1.2 per cent over March 2008. This is a slight relief of the fear of deflationary pressure as compared to the February decline of -1.6 per cent. Still, for the first quarter 2009 as a whole, the inflation rate arrives at -0.6 per cent compared to the first quarter 2008. Nevertheless, I do not expect to have deflation here to stay with us. Hoping for the large-scale financial stimulus to take off in the coming months, I expect a quick recovery from this current decline.

11-MAR-09: CPI inflation rate in China at -1.6 per cent in February 2009

The National Bureau of Statistics in China announced that the monthly CPI inflation rate for February 2009 decreased by -1.6 per cent vis-a-vis February last year. This was widely expected, but is this the advent of deflation in China? I think not. Clearly, the rapid decline is a consequence of the declining economic activity across the world during the economic and financial crisis. As such, however, and due to the large-sacle financial stimulus set to take off in the coming months, I expect a quick recovery from this current decline without the development of a sustained deflationary threat. All the more, since the government is publicly committed to achieve overall GDP growth of 8 per cent in 2009.

CPI inflation in China: Forecasts see up to 2 per cent drop in February 2009

The June CPI inflation rate for China will be published officially on 10 March2009. In the run up to this, researchers and analysts widely expect the CPI inflation in February 2009 to decline by up to 2 per cent vis-a-vis February 2008. This would be the first monthly decline of the CPI since December 2002 and it represents an unprcedented quick change of direction in inflation since its recent peak of above 7 per cent in summer 2008. Clearly, the rapid decline is a consequence of the declining economic activity across the world during the economic and financial crisis. As such, however, and due to the large-sacle financial stimulus set to take off in the coming months, I expect a quick recovery from this current decline without the development of a sustained deflationary threat. All the more, since the government is publicly committed to achieve overall GDP growth of 8 per cent in 2009.

05-MAR-2009: China sets 4 per cent inflation target for 2009

China’s National Development and Reform Commission confirmed a 4 per cent target for CPI inflation in 2009  in its report to the National People’s Congress in Beijing on 05 March 2009. Similar to 2008, this target clearly is a political target and not a monetary policy target published and pursued by the authority in charge of monetary policy, the central bank. But unlike last year, the target seems achievable at this moment in time: While all signs are hinting to temporary deflation at the moment, the second half of 2009 is likely to see an uptick in CPI inflation in response to fiscal expansion and a loose monetary policy stance in the fight against the global financial and economic crisis. And indeed recent increases of domestic loans do indicate inflation rather than deflation.

10-FEB-09: CPI inflation rate in China at 1.0 per cent in January 2009, deflationary risks rising

The National Bureau of Statistics in China announced today that the monthly CPI inflation rate for January 2009 reached 1.0 per cent vis-a-vis January last year. Monthly inflation rates are on such a rapidly declining path (from 4.9 per cent in August to now 1.0 per cent) that in fact the danger of deflation is getting more and more attention. Chinese media headlined today “Price indices reflect deflation threats“. And this is a serious danger, all eyes are now on the large-scale fiscal stimulus package announced in November 2008.

22-JAN-09: CPI inflation rate in China at 5.9 per cent in 2008: December rate down to 1.2 per cent

The National Bureau of Statistics in China announced today in a press conference on economic activity in 2008 that the  overall CPI inflation rate for 2008 reached 5.9 per cent. This is up from 4.8 per cent in 2007, which also was defined as the target inflation rate during the year. The now published annual inflation rate was mainly driven by high rates of increase in the beginning of the year, which peaked at 8.7 per cent in February 2008. While the rate is high, recent easing of inflationary pressure indicates that this does not represent any real threat at this moment in time.

Monthly inflation rates are on a declining path since summer 2008 and fell sharply from 4.9 per cent in August to 2.4 per cent in November and now 1.2 per cent in December 2008. Rapidly declining inflation rates of the recent month paired with overall concerns over the economy as the effects of the financial crisis hit China (GDP growth fell to 6.8 per cent in Q4) even warrant a call to caution for deflationary pressures. The large-scale fiscal stimulus package announced in November 2008 is a good start to prevent that from happening.

Easing inflationary pressure and concern over the economy may trigger sharp interest rate cut

With the easing of inflationary pressures towards the end of the last year (November 2008: 2.4 per cent), expectations on the PBC to cut interest rates by large margins gained momentum in the beginning of January 2009. China Daily reports of recent analyzes in China that expect a rate cut in the not-too-distant future of up to 0.81 percentage points. The likelihood of yet another sharp rate cut – after the 1.08 percentage point decrease in November 2008 – certainly will depend on the December 2008 CPI figures and the inflation outlook for 2009. Both is expected to be low; more detailed information should be available before the start of the Chinese New Year (26 January 2009).

11-DEC-08: CPI inflation rate in China lowered to 2.4 per cent in November 2008

The National Bureau of Statistics in China announced today that the November 2008 CPI inflation rate stood at 2.4 per cent over November 2007. This marks the lowest level since January 2007. As in previous months the ease of inflation comes primarily from a substantial relief in prices of food items  and other commodities in the CPI basket.

The sharp drop of inflation rates over three months from 4.9 per cent in September to 2.4 per cent in November raises concerns over deflationary tendencies for the months to come. Yesterday’s announcement of a sharp decrease of export figures in November and overall concerns of  a fast slowdown of economic activity in 2009 certainly do  contribute to such fears. All eyes are now on the large-scale  fiscal stimulus package and the implementation of the policies decided during the Central Economic Work Conference covened in Beijing this week.