Inflation in China remains very low – Commerzbank

While other countries continue to struggle with high inflation, the situation in China remains different. Consumer prices rose by just 0.6% over the past 12 months. Excluding food and energy, the figure was just 0.3%. And that is on an annual basis. On a monthly basis, prices actually fell, excluding the rise in food prices, Commerzbank’s FX Analyst Volkmar Baur notes.

Demand remains weak in China

“This reflects weak domestic demand in China, which continues to weigh on growth in the world’s second-largest economy. And as the government and the Party continue to struggle to agree on reforms or launch a fiscal program that could support private consumption in China, this situation is not expected to change in the near future. Low (core) inflation in China is therefore likely to persist for some time.”

“In contrast, we are still in a deflationary situation in terms of producer prices. Producer prices fell 1.8% year-on-year and 0.7% month-on-month. This also has global implications. As the world’s largest exporter, falling export prices also affect goods prices in the rest of the world. Seen in this light, the difficult economic situation in China has at least the small benefit of easing inflation in other countries.”