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Deflation Worries Grow as Chinese Local Provinces Report Negative Growth in Electricity Usage

07-11 15:33 Caijing
Growth of electricity consumption in China slowed to around 4 percent year-on-year in June from the previous month's 5 percent, with several provinces posting negative growth in the month

Growth of electricity consumption in China slowed to around 4 percent year-on-year in June from the previous month's 5 percent, with several provinces posting negative growth in the month, according to Chinese media, stoking worries of deflation as the second-largest economy slows.

The usage of electricity in provinces including Zhejiang, Jilin, Henan and Yunnan declined in June, the Southern Metropolis Daily reported, quoting local news bulletin in energy control authorities.

The figure has yet to be confirmed though, the local newspaper cited an official with China Electricity Council as reporting.

That may signal weak GDP data in the above-mentioned provinces, said Lin Boqiang, director with Xiamen University's energy research center, "There is another factor contributing to this: relatively larger GDP base last year."

Meanwhile, the National Bureau of Statistics announced Monday the producer price index in June fell 2.1 percent from the same month a year ago, extending May's decline and hitting a 30-month low.

Looking at PPI, deflation in the manufacturing area has continued for months, the report quoted Liu Yuhui, head of a finance team with Chinese Academy of Social Sciences, as saying. Another economist from Shenyin Wanguo Securities Li Huiyong quoted by the newspaper predicted that corporate earnings may fall beyond expectations.

"Being kept in the negative terrain for four straight months, the PPI [in June] shows not only the impact of falling global commodity prices, but also still weakening domestic gross demand, which suggests that risks of deflation have emerged," Qu Hongbin, chief economist for China at HSBC Holdings Plc, wrote on his microblog Monday.

Weakening demands from both home and abroad have sent domestic input prices to sink further in recent weeks. According to data monitored by the Ministry of Commerce, Non-ferrous metal, agricultural materials, energy, building materials, and light manufacturing materials had all seen disproportionate price falls during the June 25-July 1 period.

 

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