Consumer Prices in China Decline for First Time in 13 Months Amid Economic Concerns
In February, China recorded a 0.7% decrease in consumer prices for the first time in over a year, primarily due to weak demand and an early Lunar New Year. The government emphasized the need to stimulate domestic consumption, but significant measures were not announced. The expected inflation target of 2% appears unlikely, with additional price reductions influenced by agricultural output and competitive pricing in the automotive industry.
In February, China experienced its first decline in consumer prices in 13 months, reflecting ongoing weak demand exacerbated by the early Lunar New Year holiday. According to the National Bureau of Statistics, the consumer price index (CPI) decreased by 0.7% from the previous year and fell 0.2% compared to January. Unlike several countries facing inflation, China’s policymakers are contending with flat or declining prices, raising concerns over a potential deflationary spiral that may hinder economic growth.
The timing of the Lunar New Year, which occurred in late January rather than February, impacted spending patterns typically associated with the holiday, such as travel and dining. This early celebration had previously boosted the CPI by 0.5% in January, but resulted in a decline for February when compared to elevated levels of 2024. Excluding the holiday effect, the index only rose by 0.1% last month, according to Dong Lijuan, a statistician at the statistics bureau.
Despite the government’s aim for a 2% inflation target for the year, it is anticipated that this target will not be met, as the CPI merely rose 0.2% in 2024. Besides the Lunar New Year, Dong identified two additional factors that contributed to the falling prices: improved weather conditions leading to increased farm production and car manufacturers enhancing promotions to elevate sales, consequently lowering new car prices. The producer price index (PPI) also fell by 2.2% in February, with declines in wholesale prices more pronounced than those in consumer prices, pressuring companies to reduce costs.
In summary, China’s consumer prices decreased for the first time in over a year, primarily due to weak demand and the early occurrence of the Lunar New Year holiday. The government aims to stimulate domestic demand amid these declining prices but has not proposed significant measures. Failing to meet its inflation target raises concerns about potential economic repercussions, compounded by factors such as improved agricultural yields and aggressive marketing strategies in the automotive sector.
Original Source: apnews.com
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