CHINA’S consumer price index fell for the sixth straight month in August as an oversupply of consumer goods persisted in dragging down prices, analysts said.

　　State Statistics Bureau figure issued Friday shows consumer price index (CPI) fell 0.7 percent year on year in August, meeting market expectations.

　　Although the latest drop is less steep than the 0.9 percent year-on- year drop in July and a 0.8 percent year-on-year fall in June, CPI has stayed in negative territory for much of the year, illustrating the deflationary pressure that grips China’s economy.

　　The continued fall in prices has prompted China’s central bank to increase money supply as a means of boosting consumer demand and ameliorate lingering deflation.

　　However, increased growth in money supply as measured by the broad M2 measure to 14.4 percent year on year at end-July has apparently done little to stem the deflationary trend.

　　“We’re a bit troubled by this result because we were looking for moderation” in the deflationary trend, said JP Morgan Chase Economist Ben Simpfendorfer.

　　“But I think deflation is not an issue of weak consumer demand,” he said. “It’s a result of productivity gains and a massive investment in TV and automobile production.”

　　“We can’t expect China to resolve deflation when at the same time we have the rest of the world investing in its manufacturing base.”

　　Simpfendorfer said one test of whether China is emerging from deflation would come this month, when the effect of a one-year government freeze in tuition should add a percentage point to September’s CPI.

　　BNP Paribas Peregrine Chief Economist Chen Xingdong said that deflation should have bottomed in August and he expected slow but weak recovery from deflation throughout the rest of the year.

　　Chen said that rolling back deflation required reemployment of the hundreds of thousands of laid-off workers from State-owned firms.

　　The reiteration Thursday by China’s top leadership that the government’s policy priority is to do just that shows that the Chinese Government is serious about addressing the deflation problem, he said.(SD-Agencies)