Chinese inflation cools

The price of consumer goods in China rose 1.6 percent from a year ago in September, lower than the 1.8 percent analysts had predicted, the National Bureau of Statistics (NBS) said Wednesday. It was also down from a 2-percent increase in August.

At the same time, China's Producer Price Index (PPI), a key gauge of demand in the economy as it reflects what prices are paid at factory gates, fell 5.9 percent on the year. That rate was unchanged from a month ago, when it fell to a six-year low.

While the slow rise in consumer prices was driven by a 2.7 increase in food costs, the weak PPI data was largely attributable to manufacturers slashing their selling prices to win business amid weak demand and overcapacity.

Market analysts said the weak inflation data reinforced fears that if China's economy slowed, it would drag the world down with it.

"The Chinese economy is probably the largest risk that the global economy faces at this point," Chris Green, a strategist at First NZ Capital, was quoted as telling Bloomberg News.

Still, with consumer inflation at around half of Beijing's 3-percent target for the year, the government has plenty of room to apply more stimulus measures to the faltering economy without the fear of prices rising too high.

Beijing has cut interest rates five times since November in an effort to prop up growth and prevent job losses that would reflect poorly on the ruling Communist party leadership.

cjc/kms (AP, AFP, Reuters)