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Deflation Risks in China
World Economy

Deflation Risks in China

China’s consumer inflation eased in May while factory-gate prices were firmly stuck in deflation. The weak price data give China’s central bank plenty of room for monetary policy easing and could convince authorities to take more aggressive stimulus measures to prevent the world’s second largest economy from slipping into a broader price decline, NewsNow reported. The consumer price index rose 1.2% in May from a year earlier, slower than the 1.5% year-over-year rise in April. Much of the easing in the consumer prices was linked to milder increases in food prices, which were up 1.6% on year, against a 2.7% rise in April. The producer price index dropped 4.6% in May from a year earlier, in line with a 4.6% year-over-year fall in April and slightly worse than market expectations. The index has been on a deflationary path since March 2012, and economists say it’s unlikely to recover anytime soon. Mild inflation has given Beijing the room to undertake policy easing amid slower economic growth.

 

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