China October inflation hovers near five-year low, deflation risks seen growing

Sun Nov 9, 2014 10:32pm EST
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BEIJING (Reuters) - China's annual consumer inflation remained near a five-year low in October at 1.6 percent, further evidence that the world's second-largest economy is cooling and reinforcing expectations that authorities will roll out more measures to support growth.

Analysts polled by Reuters had expected annual consumer inflation to be 1.6 percent in October, the same as September, which was the weakest reading since January 2010.

On a monthly basis, consumer inflation was flat in October, the National Bureau of Statistics said on Monday. That compared with 0.1 percent expected by economists.

"The risk of deflation has risen as the economy is expected to slow further in the next few quarters," ANZ economists said in a research note.

"This is a significant risk ... which requires China's policymakers to monitor the situation closely and take action swiftly," ANZ said, suggesting the central bank could inject money into the system more frequently to keep the financial system working smoothly.

Facing mounting risks to growth and rising risks of deflation, Beijing is widely expected to continue rolling out a steady stream of stimulus measures in coming months, though most economists believe it will hold off on more aggressive action such an interest rate cut unless conditions sharply deteriorate.

President Xi Jinping said on Sunday that the risks facing China's economy are "not that scary" and even if China's economy were to grow 7 percent, that would still rank it at the forefront of the world's economies.

But signs are growing that the economy is continuing to lose momentum despite a raft of earlier stimulus measures, putting the government's official 2014 growth target of 7.5 percent at increasing risk.

The producer price index fell 2.2 percent from a year ago, its 32nd consecutive decline, as sluggish demand curbed the pricing power of companies, the National Bureau of Statistics said.   Continued...

A vendor sells soybean milk at a roadside snack booth in Beijing, October 16, 2014.  REUTERS/Jason Lee