China producer prices continue declines

BEIJING - China's producer price index (PPI), which measures inflation at wholesale level, dropped 4.3 percent year on year in January, the National Bureau of Statistics said on Tuesday.

Related story: Deflation 'may force central bank's hand', by Chen Jia, China Daily

Further easing in consumer inflation and accelerating industrial deflation in November reflect stagnation in the world's second-largest economy, and that may push the central bank to cut banks' required reserve ratios as a means of easing liquidity and stabilizing growth, market observers said on Wednesday.

They said that China's top leaders may discuss a reduction in the 2015 Consumer Price Index target to 3 percent, from 3.5 percent this year, during the Central Economic Work Conference in Beijing. A statement will be issued when the meeting ends on Thursday.

The comments followed a report by the National Bureau of Statistics, which said that the CPI edged down to 1.4 percent year-on-year in November from 1.6 percent in October, the lowest level since December 2009.

Warm weather and adequate supplies pushed food prices down 0.4 percent month-on-month.

The cost of items in the CPI basket other than food slid 0.1 percent from October, the first drop in three months, as global oil prices weakened.

"Consumer prices may remain low, and the full-year CPI is expected to be 2 percent, much lower than the 3.5 percent target," said Lian Ping, chief economist at Bank of Communications Co Ltd.

"The CPI may continue to ease next year."

The NBS also said that the Producer Price Index sank 2.7 percent year-on-year in November, the largest decline since July 2013. The index has been negative for 33 consecutive months－the longest period of deflation in 30 years.