Economists at Citi called China’s core inflation numbers “concerningly low,” after data showed prices dropped for the fourth straight month in January.
China’s consumer prices fell 0.8% year-over-year, compared to the 0.5% decline expected by economists, marking the biggest decline since Sept. 2009.
Core inflation was still positive, but receding, down to 0.4% year-over-year from 0.6%.
Producer prices skiddded by 2.5% year-over-year, though that actually was stronger than the 2.7% decline expected by economists.
Citi economists led by Xinjy Ji say a later Chinese new year this year may have had a downward impact, but flagged the end of services reflation.
“Services reflation looks behind us now. Durable goods prices are still weak, not to mention increasing concerns on China’s overcapacity in certain sectors. Weak income expectations especially for middle- to high-income groups are unlikely to be helpful either,” they said in a note to clients.
They say they’re not expecting a “bazooka” but new policies such as a 5% growth target, a reduction in the loan prime rate as well as special government bond issuance.
Economists at ING say inflation may have hit bottom, noting the drag from pork prices is likely to fade in coming months.
The Hang Seng
HK:HSI
slumped 1.3% on Thursday while the Shanghai Composite
CN:SHCOMP
rose 1.3%, its third straight rise, a period in which it’s gained 6.1%.
See also: In China, deflation tightens its grip
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