China’s weak consumer price growth boosts deflation fears

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China’s consumer prices rose less than expected in August, as concerns grow that deflationary forces are taking root in the world’s second-largest economy.

China’s consumer price index rose 0.6 per cent year on year, slightly below analysts’ expectations of 0.7 per cent in a Reuters poll but faster than July’s 0.5 per cent increase, the National Bureau of Statistics said on Monday.

Industrial prices fell 1.8 per cent year on year, compared with a decline of 0.8 per cent in July and analysts’ expectations of a 1.4 per cent fall.

Underlying deflation has become a leading concern for many observers of China’s economy, with the former central bank governor Yi Gang warning last week that China needed “proactive fiscal policy” and “accommodative” monetary measures to support demand.

China’s GDP deflator, which measures the impact of inflation on the real value of an economy’s total output, has been negative for the past few quarters, he said. A negative GDP deflator indicates deflationary forces in the economy.

This is a developing story