Consumer prices in China – additional information
The Consumer Price Index (CPI) is an economic indicator that measures changes in the price level of a representative basket of consumer goods and services. It is calculated by taking price changes for each item in the market basket and averaging them. Goods and services are weighted according to their significance. The CPI can be used to assess the price changes related to the cost of living. It is also useful for identifying periods of inflation and deflation. A significant rise in CPI during a short period of time denotes inflation and a significant drop during a short period of time suggests deflation.
Annual projections of China’s inflation rate forecast by the IMF estimate a relatively low increase in prices up until 2018. The implications of low inflation are two-fold for a national economy. On the one hand, price levels remain largely stable which may lead to equal or increased spending levels by domestic consumers. On the other hand, low inflation signifies an expansion slowdown of the economy, as is reflected by China’s gross domestic product growth.
In 2014, consumer prices in China have risen slowly but steadily. By comparison, producer prices have fallen constantly, as is shown by the monthly producer price index (PPI). The deflation trend in the PPI reflects deepening price cuts of crude oil, refined oil and steel in China. It also denotes possible structural overcapacity in some manufacturing sectors.