Fresh data on Friday from the Chinese National Bureau of Statistics showed that consumer prices in China rose just 2 percent last year, well below the government's target of 3.5 percent. Is there a threat of deflation? Prices of commodities and raw materials at the producer level were 3.3 percent lower than a year earlier, the 34th consecutive monthly decline the biggest drop since September 2012.
Oil-consuming countries around the world are seeing inflation fall as the price of crude oil has crashed since last July. By itself, that lowers energy bills and should help boost spending and economic growth.
But the global price drop is hitting a wide range of commodities and raw materials, from plywood to sugar. In Europe's slow-moving economy, prices overall shifted into reverse last month—down two-tenths of a percent in December—touching off worries that a prolonged period of falling prices could take hold, dragging economic growth along with it.
So far, that doesn't appear to be happening—in Europe or China. Despite the plunge in oil prices, the costs of other consumer goods are rising, though slower than government officials would like.
While China's economy is still growing at a rate that would represent a boom in the developed world, the pace has slowed since it undertook a massive stimulus of borrowing and building after the global financial crisis of 2008. China's growth pace likely slowed to 7.2 percent in the fourth quarter, according to a Reuters poll of economists. That would be the most sluggish rate since 2008 and the weakest pace in 24 years.
Low oil prices should help spur growth by boosting spending on other goods and services. China's bill for imported oil came to about 2.5 percent of gross domestic product in 2013, according to economists at Capital Economics. If prices stay below $60 per barrel, they figure that will add more than more than a full percentage point to China's falling GDP.