China’s producer prices continued their downward trend for the 16th consecutive month in January, while consumer prices experienced their most significant decrease since 2009.
This highlights the substantial challenge confronting Beijing as it endeavors to stimulate the world’s second-largest economy.
According to the National Bureau of Statistics, China’s producer price index decreased by 2.5% in January compared to the same period last year. Although slightly better than the anticipated 2.6% decline, it follows a 2.7% drop in December.
In contrast, the country’s consumer price index registered a 0.8% decrease in January compared to the previous year, surpassing the median estimate of a 0.5% decline in a Reuters survey.
This marks the fourth consecutive month of decline. However, monthly, the CPI increased by 0.3% in January compared to December, slightly lower than the median forecast of 0.4% growth.
Hao Hong serves as the chief economist and partner at GROW Investment Group, shared insights with CNBC’s “Street Signs Asia” during an interview on Thursday.
“The market is not completely surprised by the deflation numbers because the deflationary pressures upstream have been lingering for well more than a year now, so the upstream pressures now are being passed on the downstream,” said Hao Hong.
He directed attention to the significant 17.3% decrease in pork prices observed in January compared to the previous year.
This decline reflects a substantial oversupply situation, stemming from authorities’ vigorous efforts to replenish the supply of China’s primary meat staple over the past two years following the swine flu outbreak.
Overall, there was a 5.9% decrease in food prices in January compared to the same period last year.
The Bureau, in a separate statement, reported that the Core CPI, excluding energy and food prices, increased by 0.4% in January compared to the previous year. Monthly, there was a 0.3% growth from December, according to the NBS.
The NBS attributed the inflation data for January to the significant base effect of the Spring Festival or the Lunar New Year, which occurred in January last year. This year, the festival falls in February.
Thursday’s inflation figures underscore ongoing concerns that China may be on the brink of deflation.
The modest price increases underscore what China’s top leaders have characterized as a “tortuous” economic recovery following the country’s gradual relaxation of strict zero-Covid measures towards the end of 2022.
China stands in stark contrast to other major economies globally, the majority of which are grappling with persistently high inflation rates.
According to the most recent official and private assessments of manufacturing activity, increased market competition has curtailed the negotiating leverage of Chinese firms, resulting in a decline in output prices.
The Chinese economy has suffered significant blows to consumer confidence and overall growth due to a downturn in the property market.
This slump ensued after Beijing implemented stringent measures in 2020 to curb developers’ excessive dependence on debt for expansion.
