China's December CPI falls short of forecasts due to lower oil prices, slack consumer demand: analysts

By Shen Weiduo Source:Global Times Published: 2019/1/10 17:23:40

Analysts point to lower oil prices, slack consumer demand

A consumer shops at a supermarket in Taiyuan, North China's Shanxi Province in January. Photo: VCG

The consumer price index (CPI), a main gauge of inflation in China, rose 1.9 percent year-on-year in December, the lowest growth since June 2018 and down from 2.2 percent in November, according to figures released by the National Bureau of Statistics (NBS) on Thursday.

Analysts had expected a 2.1 percent CPI gain for December.

The CPI growth rate for the whole of 2018 was 2.1 percent, up from 1.6 percent for 2017 but squarely lower than the annual government target of 3 percent.

"The sharp decline in oil prices may be the main cause for the lower-than-expected CPI figure," Dong Dengxin, director of the Financial Securities Institute at Wuhan University of Science and Technology, told the Global Times on Thursday.

"Normally, the CPI should be rising at this time because vegetable prices tend to go up in freezing winter season. There's also the impact of the New Year holidays," Dong said, adding that the full-year figure of 2.1 percent growth was still strong.

Sheng Guoqing, a senior statistician with NBS, also cited the drop in oil prices as a reason for slower CPI growth. 

Gasoline and diesel prices fell 10.1 percent and 10.8 percent, respectively, compared with November, which together led the CPI to fall by about 0.22 percentage points, Sheng said in a statement on the NBS' official website.

Liu Xuezhi, senior analyst of the Bank of Communications, told the Global Times on Thursday that the lower-than-expected CPI figure also showed sluggish consumer demand amid uncertainties in the country's economic outlook.

"However, with the coming of China's Lunar New Year festival, the CPI is likely to edge up. Also, the government has taken series of measures to stimulate domestic demand," Dong said.

NBS figures showed that the food price index rose 2.5 percent from a year earlier in December, contributing 0.48 percentage points to overall CPI growth.

The producer price index (PPI), or factory-gate inflation, rose 0.9 percent in December from a year earlier, the slowest since September 2016 and a dramatic drop from the 2.7 percent growth in November, according to the statistics bureau.

Liu said that the slowdown in PPI, indicating weaker industrial profits, tells of the rising downward pressures on Chinese manufacturers.

"With more government policies to support small and medium-sized enterprises and improve their financing environment - some of these measures have already been implemented - the PPI is expected to rise," Liu said.

In the short term, the PPI might still rise relatively slowly and the CPI will be held at a steady level, Liu predicted.

Newspaper headline: CPI rises 2.1% in 2018, below annual target of 3%


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