Inflation slow in China

BOFIT Viikkokatsaus / BOFIT Weekly Review 2015/03

December consumer prices were up just 1.5 % y-o-y. Food prices, up nearly 3 %, were the biggest driver of inflation. Prices other than food were up 0.8 % y-o-y, but were lower than in November. November consumer price inflation was 1.4 % y-o-y.

Domestic prices for fuels and other energy formats have not fallen as rapidly as on world markets, however. Officials have reduced the ceiling price on fuels twelve times since last June. In the same period, the fuel consumption tax was increased three times, slowing the decline in retail fuel prices. Gasoline prices are down 25 % from last June and diesel oil prices down 30 %. The drop in global oil prices, in contrast, was nearly 60 % over the period.

The slide in producer prices accelerated from a drop of 2.7 % y-o-y in November to 3.3 % in December. On-year deflation in producer prices has persisted since March 2012, and producer prices were down at the end of 2014 by about 7 % compared to spring 2012.

Price trends in China are also affected by price declines in other countries. November import prices were down 5 % y-o-y. Export prices remained roughly at the 2013 level. Consumer price inflation this year could be moderated especially by lower prices for manufactured products, energy and housing.

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