China’s Consumer Inflation Falls Below Zero, Signaling Deflationary Concerns
China’s consumer inflation has fallen into negative territory, with a 0.7% year-over-year decline, highlighting deflationary pressures. Factory deflation continues for 29 months with a slight slowdown in the drop of producer prices. The government has set its inflation target at 2% for 2025, reflecting growing concerns over the economy’s performance amid weak domestic demand and external trade tensions.
China has recently reported its consumer inflation rate falling below zero for the first time in 13 months, emphasizing persistent deflationary pressures within its economy. According to the National Bureau of Statistics, the consumer price index decreased by 0.7% year-over-year, compared to a gain of 0.5% in the preceding month, with analysts predicting a 0.4% decline.
Furthermore, factory deflation persists into its 29th month, although the producer price index experienced a milder decline of 2.2%, slightly better than January’s negative 2.3%. A primary cause of this inflation drop could be attributed to a high statistical base from the previous year, following heightened prices during the Lunar New Year, which occurred earlier this year than in 2024.
In March, analysts anticipate a clearer understanding of China’s inflation trajectory, with expectations that government stimulus efforts will bolster domestic demand. Currently, China is facing a potential record streak of price declines due to weak consumer spending and ongoing issues within the property sector.
China has adjusted its inflation target to the lowest in over two decades, aspiring for approximately 2% consumer-price growth by 2025, down from 3%. This adjustment indicates leadership awareness of deflationary challenges impacting the economy, which has reported a stagnant consumer inflation rate of just 0.2% over the last two years.
Urgent calls for economic stimulation have emerged, particularly ahead of the annual parliament session, where the government declared a growth objective of 5% for 2025, even amid escalating trade tensions with the United States. Despite these ambitions, Bloomberg’s calculations suggest that nominal economic growth may only meet the 5% target, signifying predictions of minimal inflation moving forward.
In summary, China’s recent turn to negative consumer inflation highlights ongoing deflationary pressures within its economy. With a revised inflation target and government efforts to stimulate growth, the long-term outlook remains uncertain amid weak spending and property sector challenges. The global economic climate further complicates efforts to achieve substantial inflation.
Original Source: www.business-standard.com
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