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With the major slowdown looming large,China, globally the 2nd largest economy, faced deflation risk
as the producer prices continued to fall in July, touching the lowest
level since 2009.
The producer price
index (PPI), an economic tool to measure costs for goods at the factory gate, fell 5.4%
year on year in July, widening from the 4.8% drop seen a month earlier, data
from the National Bureau of Statistics (NBS) showed on Sunday.
The
July reading dipped to the lowest level since the end of 2009 and marked the
41th straight month of decline, state-run Xinhua news agency reported.
Specifically,
prices of production materials fell 6.9%, while those of consumer goods edged
down 0.3%.
For the first
seven months, PPI averaged at a 4.7% drop year on year.
On a monthly
basis, the index went down 0.7% in July.
NBS
statistician Yu Qiumei attributed the PPI contraction mainly to dropping prices
of industrial products and decreasing costs for oil and natural gas production.
"Domestic
demand remained sluggish, and commodity prices were on the decline. China still faces grim deflation risk," Qu
Hongbin, chief China economist at HSBC said as per news reports.
In a sign of
weak demand, China's imports nosedived by 8.6% in July.
A sharp
decline of 8.9% in exports also cast a shadow on this giant economy.
To make things
worse, major commodity prices are lowering down consistently, and there are no
immediate signs of quick recovery.
As Per agency
reports,The World Bank predicted that energy prices will average 39% below 2014
levels this year, with metal prices down 16% and iron ore plummeting 43%.
Peking
University economist Su Jian said weak commodity prices drive down the prices
of finished products, which delays investment and postpone consumption.
Weak demand
caused by shrinking business activity will in turn sink commodity prices.
"To avoid
such a vicious circle, we need more expansionary policies," Su said as
reported by News agency.
China's growth
stood at seven per cent in the first half of the year with forecasts that it
would go down below that.
The
International Monetary Fund (IMF) in its recent forecast said China's economy will slow down to 6.8% this year followed
by 6.3% in 2016 and 6% for 2017.
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News Source- DNA/PTI,
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