- Avery Shenfeld of CIBC Economics
China's consumer inflation rose in December amid increasing food prices, while companies' factory-gate prices continued to decline, adding to fears about growing deflation risks in the world's second biggest economy. According to the National Bureau of Statistics, China's CPI climbed 1.6% last month from a year earlier, compared with November's print of 1.5%. Food prices increased 2.7% in December, while non-food items climbed 1.1%. For all 2015, inflation climbed 1.4%, the slowest annual gain since 2009 and well below the government's goal of keeping last year's inflation below 3%. In 2014, China's inflation rose 2.0%. At the same time, the producer price index remained unchanged at minus 5.9% in the reported month. It was the PPI's 46th monthly decline in a row as Chinese manufacturers continue to battle fierce price pressure and fight overcapacity. For all of 2015, the PPI fell 5.2% compared with a decrease of 1.9% in 2014.
China's consumer price index is likely to rise 1.7% in 2016 from last year while its producer price index is predicted to fall 1.8% on an annual basis, according to the People's Bank of China estimates. Deflationary cycles encourage consumers to refrain from buying and businesses to hold off from investing indefinitely amid anticipation that prices will continue declining.
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