Workers operate machinery on the assembly line at a factory in Huizhou, Guangdong province, China. (Photographer: Qilai Shen/Bloomberg)

China Factory Prices Stabilize in February Amid Deflation Risk

(Bloomberg) -- China’s factory price growth remained steady in February at a close-to-zero reading that signals the continued risk of deflation in the world’s second-largest economy.

  • The producer price index rose 0.1 percent in February from a year earlier, while the consumer price index rose 1.5 percent, according to the National Bureau of Statistics. That was compared to estimates of 0.2 percent and 1.5 percent respectively.
China Factory Prices Stabilize in February Amid Deflation Risk

Key Insights

  • In line with the global low-inflation environment, China’s producer prices and consumer prices have slowed since late last year, adding to the pressure on company profits and debt repayments
  • “Average producer goods prices largely stabilized last month, as prices of steel and coal both rebounded slightly month-on-month," Wang Tao, head of China economic research at UBS in Hong Kong, wrote in a note.

What Our Economists Say

“Disinflation continues, and deflation in the manufacturing sector may be around the corner. The weak consumer and producer price data underline the need for continued government support for the economy, particularly from fiscal policy.”
David Qu, economist in Hong Kong
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  • Prices have been slowing for a while, with the gross domestic product deflator at the lowest level since 2016 at the end of 2018.
  • However, prices of global commodity futures have rebounded from a slump in January, according to the Bloomberg Commodity Spot Index

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