Consumer prices in China fell last month at their fastest rate in six months, official data showed Wednesday, as leaders struggle to reignite demand in the world’s second-largest economy.
Beijing has in recent years been battling sluggish domestic spending, dragged down by a prolonged slump in the country’s vast property market as challenges facing its exports mount.
The consumer price index — a key measure of inflation — dropped 0.4 percent year-on-year in August, according to data released by China’s National Bureau of Statistics (NBS).
The figure was lower than the 0.2 percent fall forecast in a Bloomberg survey of economists and marked the steepest decline since February’s 0.7 percent drop.
After a stable reading in July, the slip back into negative territory “reflects volatile food prices”, Zichun Huang, China economist at Capital Economics, wrote in a note.
“While underlying inflation has actually ticked up lately, this mostly reflects temporary factors rather than any meaningful improvement in underlying supply-demand imbalances,” she wrote.
As major Western economies grapple with the spectre of inflation, China’s leaders are attempting to counteract stagnant or falling prices.
The deflationary run dampens investor confidence and threatens Beijing’s official growth target for this year of around five percent.
In another statement Wednesday, NBS statistician Dong Lijuan attributed the CPI’s year-on-year fall to a high base effect, in addition to food price increases that were “below seasonal levels”.
Consumer prices in August 2024 crept up 0.6 percent.
Factory gate prices also dropped last month, the NBS said, but at a slower rate than recent months.
The producer price index (PPI), which measures the prices of goods before they enter wholesale or distribution, fell 2.9 percent, an improvement on the 3.6 percent decline in July and in line with a Bloomberg forecast.
But the latest fall extends a years-long streak in negative territory stretching back to late 2022.
“With weak domestic demand and persistent overcapacity, we doubt there will be much improvement in China’s deflationary environment in the near term,” wrote Huang at Capital Economics.
China has struggled to maintain a strong economic recovery from the pandemic, as it fights a debt crisis in its massive property sector, chronically low consumption and elevated youth unemployment.
Official data this week showed exports in August expanded 4.4 percent year-on-year but missed forecasts.
Exports to the United States — China’s largest single trading partner — continued to fall as trade tensions between Beijing and Washington simmered.
AFP
