Chinese prices record rare fall

Chinese consumer prices showed an annual fall in February for the first time since 2002, figures have shown.

The consumer price index fell 1.6% from a year earlier, dragged down by falls in food prices but officials downplayed the threat of a deflationary spiral.

Consumers welcome falling prices, but a prolonged drop undermines company profits as people put off purchases.

Growth in China has slowed sharply as its exports have been hit hard by the global economic downturn.

"Deflation is a symptom of a weak real economy and industrial capacity, which has left companies with little pricing power," said Jing Ulrich, an analyst at JP Morgan.

She added that China's bout of deflation was likely to be temporary as government measures to kick-start spending take effect.

Slowdown

China's inflation rate hit a 12-year high of 8.7% in February 2008 because of shortages of grain and pork.

Officials said this high base for comparison partly explained February's fall.

In the first two months of 2009, prices were down just 0.3% from a year earlier.

In the final three months of last year, China's economy expanded by 6.8% from a year earlier - below the 8% that officials view as the level needed to keep unemployment in check and avoid social unrest.

Overall growth in 2008 stood at 9% - the first time since 2002 that the economy has expanded at a single-digit pace.