China Inflation Drops to Five-Year Low

The yearly consumer inflation rate of China hit fell to a five-year trough last month while factory deflation even aggravated.

This stresses the country’s intensifying economic weakness and puts pressure on policymakers to infuse additional stimulus to fortify growth.

Threats of deflation are increasing for the second-biggest economy in the world because of the property sector’s dip and prevalent factory congestion aggravated by doubtful global outlook and sliding prices of commodities.

Beijing has to provide additional policy support after the National Bureau of Statistics announced that the country’s CPI increased 0.8 percent in January. This was the weakest report since of November 2009.

Chinese economists believe that factory depression continues to be a sizeable worry.

Producer price index decreased 4.3 percent in January which is more than the 3.8 percent plunge predicted by analysts. Price cuts have already undermined the profitability of local manufacturers.

The People’s Bank of China is perceived to relax policy some more following its move to cut down bank reserve preconditions for the first time after more than two years. It can be a protective action versus capital outflows.

Stock indexes in the mainland rose approximately one percent after this data was released.

Meanwhile, the surged of food price rises waned from 2.9 percent last December to 1.1 percent in January and contributed to approximately 80 percent of inflation decline.

Consumer prices went up two percent in 2014 which is below the goal of 3.5 percent as deflation fears worsened.

Beijing may reduce GDP targets to seven percent in 2015.