China’s CPI falls, PPI stalls

From the China National Bureau of Statistics:

In February 2012, the national consumer price level rose by 3.2%. Among them, the city rose 3.2 percent in rural areas rose 3.2 percent; food prices rose 6.2%, non-food prices rose 1.7%; consumer prices rose 3.9 percent, prices of services rose 1.5 percent. January-February average, the national consumer price level rose 3.9 percent over the same period last year.

In February, the national consumer price level fell 0.1%. In cities fell 0.1 percent, down 0.1% in rural areas; food prices fell 0.3%, non-food prices were flat; consumer goods prices fell 0.1%, prices of services decreased by 0.2%.

On the face of it this is good news. With the Chinese New Year spike washing out in a hurry, contained CPI will enable further monetary easing, at least reserve ratio cuts. Here are the sub components:

The heaviest fall still looks to be in food, which is good.

But I am still worried. Look at the PPI:

February 2012, the country’s industrial producer prices and last year, unchanged from the same month rose 0.1%. Purchasing prices of industrial producers rose 1.0 percent, rose 0.1%. 1 – February 2012 average, industrial producer prices rose 0.4 percent, the purchasing prices of industrial producers rose 1.5 percent.

In just August the PPI was running at 7.3%. Here’s the chart:

These falls are fast, and although stimulus is surely coming (limited by the need to keep the lid on housing), the pace of declines suggests some sort industrial stall is underway in China. Still I can’t see anything overly alarming in the sub components:

Mixed news in all.