China’s CPI and PPI Drop Together in February

March 13, 2009 1:52 am Last Updated: October 1, 2015 10:04 pm

China's Consumer Price Index (CPI) in February dropped 1.6 percent compared to the same period last year, but the price of rice rose 4.4 percent.  (Getty Images)
China's Consumer Price Index (CPI) in February dropped 1.6 percent compared to the same period last year, but the price of rice rose 4.4 percent. (Getty Images)
The latest statistics released by China’s National Bureau of Statistics (NBS) show that both China's Consumer Price Index (CPI) and Producer Price Index (PPI) in February have dropped 1.6 percent and 4.5 percent respectively comparing to the same period last year.

According to the March 10 released data, the CPI figure in China’s cities dropped 1.9 percent, while the figure in rural areas dropped 0.8 percent. The price of food dropped 1.9 percent, among which meat and meat products, vegetables, and oils had a sharper drop.

However, the price of grain rose 4.4 percent.

For January and February combined data, the CPI dropped 0.3 percent, however cities dropped 0.6 percent, while rural areas rose 0.3 percent, grain price rose 1.0 percent, and housing price dropped 2.6 percent.

The statistics showed that in February, the PPI also dropped 4.5 percent. The purchased price of raw materials, fuel, and power dropped 7.1 percent.

The price of crude oil dropped 56.3 percent; gasoline and diesel whole sale price dropped 0.5 and 11.4 percent; however, the coal whole sale price rose 18.7 percent.

The January and February combine PPI dropped 3.9 percent. The purchased price of raw materials, fuel, and power dropped 6.2 percent.

People in different fields have different explanations for the rare phenomenon of the CPI and PPI dropping together in February. Staff of the NBS say that this was mainly due to the sharp drop of the price of the primary products in the international market and some other special factors, so it cannot be determined as the deflation.

Deputy governor of People's Bank of China, Su Ning, says that there’s the pressure of deflation at present, but not really deflation.

The manager of Macro Research Department of Haitong Securities Co. and the chief analyst, Chen Lu, says that the sharp price drop of international crude oil, and the price drop of China Oil and China Petrifaction have caused oil prices to drop, which has led to the drop of CPI and PPI.

“It seems good that things are cheaper, but the continuous drop of price indicates the lack of confidence in consumption. Because the factory stock increase, they dare not add investment, which will cause rapid decline of the economics and the decrease of job opportunities.” Chen said, “So for many people, the specter of deflation is more significant than that of inflation.”

Read the original article in Chinese