China’s consumer price inflation continued to show signs of weakness in December, with a minimal year-on-year increase of just 0.1%, according to data from the National Bureau of Statistics released on Thursday.
This marks a slowdown from the 0.2% rise in November and has contributed to growing concerns over the possibility of deflation in the world’s second-largest economy.
The latest consumer inflation figure aligns with analysts’ expectations, although it remains below the government’s target inflation rate. Core consumer price inflation, which excludes volatile food and energy prices, rose by 0.4% year-on-year in December, slightly higher than the 0.3% increase in November.
On a month-on-month basis, China’s consumer price index (CPI) remained flat in December, compared to a 0.6% decline in November. Food prices were a significant factor in the CPI slowdown, with food costs dropping by 0.6% from the previous month. Notably, fresh vegetables and fruits saw a decline of 2.4% and 1%, respectively, while pork prices, which have a significant impact on the CPI basket, dropped by 2.1%.
Wholesale prices, as measured by the producer price index (PPI), also continued their downward trend, falling by 2.3% year-on-year in December, marking the 27th consecutive month of declines. While the PPI reading was slightly better than economists’ forecasts of a 2.4% decline, it remains a sign of persistent deflationary pressures. On a monthly basis, the PPI decreased by 0.1%, compared to a 0.1% increase in November.
The ongoing deflationary trend in China raises concerns about weak domestic demand, which has been exacerbated by a combination of factors, including a prolonged downturn in the housing market, low consumer spending, and heightened economic uncertainty. Despite a series of stimulus measures introduced by the government, including interest rate reductions, increased bank lending, and support for the property and stock markets, domestic consumption has struggled to rebound.
Economists caution that China could be at risk of entering a deflationary cycle, where falling prices discourage spending and investment, potentially leading to a prolonged period of economic stagnation. Analysts also note that while some signs of recovery, such as expanding factory activity, are visible, the broader economic challenges, including weak consumer sentiment and external factors like trade tensions, remain significant hurdles.
