China’s consumer and producer price indices fell last month, putting further pressure on policymakers to consider more easing measures as industrial profits face a squeeze.
The consumer price index (CPI) dropped to a 12-month low of 1.7% year-on-year, down from 1.9%, official figures show. This was below analysts’ forecasts that the reading would remain flat compared with the previous month.
Food prices led the fall, sinking from 2.5% to 1.9%. Energy prices continued to decrease while non-food inflation was steady at 1.7%.
Factory price levels approached deflationary territory, reaching a two-year low of 0.1% y/y from 0.9% the month before. Producer prices have been falling on a monthly basis for the past quarter, as oil continues to cheapen and demand for manufactured goods slows.
If factory gate prices drop further, as is expected by some analysts, this would hurt the pockets of industrial sector firms. This may lead the government to find ways to assist firms with financing, such as by implementing more rate cuts.