China narrowly avoided slipping into deflation last month with prices rising at their slowest pace in nine months, official figures showed Thursday, as Beijing struggles to kickstart consumer activity in the world’s No. 2 economy.
The tepid reading comes after the government unveiled a range of measures at the end of last year aimed at boosting consumption as well as providing support for the troubled property sector, including interest rate cuts.
However, data showed that has not yet filtered through, with growth in the consumer price index (CPI), a key measure of inflation, easing to 0.1 percent last month, from 0.2 percent in November, according to the Chinese National Bureau of Statistics. The reading is the lowest since March.
Photo: EPA-EFE
A survey of economists had forecast 0.1 percent.
However, core CPI — which excludes volatile food and fuel prices — picked up for a third month to 0.4 percent from a year ago, reaching the highest level since July last year, the bureau said.
For the whole of last year, prices were up 0.2 percent, the same as the previous year.
Sluggish spending — combined with persistent woes in the property sector and local government financing strains — has cast doubt on the feasibility of official growth targets.
China emerged from a four-month period of deflation in February last year, a month after suffering the sharpest fall in prices for 14 years.
While deflation suggests the cost of goods is falling, it poses a threat to the broader economy as consumers tend to postpone purchases under such conditions, hoping for further reductions.
A lack of demand could then force companies to cut production, freeze hiring or lay off workers, while potentially also having to discount existing stocks — dampening profitability even as costs remain the same.
The latest data showed that factory deflation extended into a 27th month last month, though the producer price index recorded a slower drop of 2.3 percent, according to the bureau.
“Recent economic data stabilized but the momentum is not strong enough to generate upward pressure on consumer prices yet,” Pinpoint Asset Management chief economist Zhang Zhiwei (張智威) said in a note.
“The deflationary pressure is persistent,” he said.
Low inflation might lead to an increase of real interest rates, the Economist Intelligence Unit principal economist Yue Su (蘇月) said.
“So monetary easing policy needs to be more proactive to really reduce the borrowing cost of enterprises, which is important for a broad recovery of the economy,” she said.
ADVANCED: Previously, Taiwanese chip companies were restricted from building overseas fabs with technology less than two generations behind domestic factories Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), a major chip supplier to Nvidia Corp, would no longer be restricted from investing in next-generation 2-nanometer chip production in the US, the Ministry of Economic Affairs said yesterday. However, the ministry added that the world’s biggest contract chipmaker would not be making any reckless decisions, given the weight of its up to US$30 billion investment. To safeguard Taiwan’s chip technology advantages, the government has barred local chipmakers from making chips using more advanced technologies at their overseas factories, in China particularly. Chipmakers were previously only allowed to produce chips using less advanced technologies, specifically
The New Taiwan dollar is on the verge of overtaking the yuan as Asia’s best carry-trade target given its lower risk of interest-rate and currency volatility. A strategy of borrowing the New Taiwan dollar to invest in higher-yielding alternatives has generated the second-highest return over the past month among Asian currencies behind the yuan, based on the Sharpe ratio that measures risk-adjusted relative returns. The New Taiwan dollar may soon replace its Chinese peer as the region’s favored carry trade tool, analysts say, citing Beijing’s efforts to support the yuan that can create wild swings in borrowing costs. In contrast,
TARIFF SURGE: The strong performance could be attributed to the growing artificial intelligence device market and mass orders ahead of potential US tariffs, analysts said The combined revenue of companies listed on the Taiwan Stock Exchange and the Taipei Exchange for the whole of last year totaled NT$44.66 trillion (US$1.35 trillion), up 12.8 percent year-on-year and hit a record high, data compiled by investment consulting firm CMoney showed on Saturday. The result came after listed firms reported a 23.92 percent annual increase in combined revenue for last month at NT$4.1 trillion, the second-highest for the month of December on record, and posted a 15.63 percent rise in combined revenue for the December quarter at NT$12.25 billion, the highest quarterly figure ever, the data showed. Analysts attributed the
Taiwan Semiconductor Manufacturing Co’s (TSMC, 台積電) quarterly sales topped estimates, reinforcing investor hopes that the torrid pace of artificial intelligence (AI) hardware spending would extend into this year. The go-to chipmaker for Nvidia Corp and Apple Inc reported a 39 percent rise in December-quarter revenue to NT$868.5 billion (US$26.35 billion), based on calculations from monthly disclosures. That compared with an average estimate of NT$854.7 billion. The strong showing from Taiwan’s largest company bolsters expectations that big tech companies from Alphabet Inc to Microsoft Corp would continue to build and upgrade datacenters at a rapid clip to propel AI development. Growth accelerated for
RSS