Deflation worries on the rise

Inflation in the world's second-largest economy dropped to 1.6 percent in September, down from 2.0 percent in the previous month, the National Bureau of Statistics reported Wednesday.

The figure fell way short of the 3.5-percent annual target set by Beijing and signaled that deflationary pressures are rising in China.

While moderate inflation tends to spur consumption as it encourages people to buy goods before prices go up, falling prices by contrast make consumers delay purchases and companies to put off investment, both of which can weigh on growth tangibly.

Growth incentives required

Much of the September decline was due to falling prices for food, fuel and other commodities benefiting consumers worldwide.

Economists said the latest figures could give authorities more room to stimulate the economy, with Beijing expected to continue rolling out a steady stream of additional measures in months ahead, while holding off on aggressive action such as an interest rate cut.

"The low inflation readings will open the door to further targeted monetary and fiscal easing," Credit Agricole analyst Dariusz Kowalczyk said in a statement. "There's also less need for a strong currency to offset imported inflation."

German deflation woes much bigger

German inflation stood at a four-and-a-half-year low in September due mainly to lower energy costs, the Federal Statistics Office said in a press release Wednesday. Consumer prices in Germany grew by only 0.8 percent, compared to the same month in 2013.

That was the lowest inflation rate since February 2010. It was unchanged from August. The stifled growth in inflation means consumers in Europe's largest economy will continue to enjoy stable prices, but it underlines concerns about deflation and mediocre economic growth taking hold in the 18-member eurozone and worldwide.

hg/sgb (AFP, Reuters)