China consumer inflation rises less than expected in January as producer price deflation persists
Chinese consumers are experiencing “luxury embarrassment” similar to that experienced in the United States during the 2008-09 financial crisis, according to a June report by Bain and Company.
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While consumer inflation in China rose less than expected in January, deflation in producer prices continued; this was a sign that deflationary pressure was continuing in the absence of stronger incentives.
Data from China’s National Bureau of Statistics on Wednesday showed that the consumer price index rose 0.2% in January from a year earlier; This was below economists’ forecast for a 0.4% increase in a Reuters poll. This was the highest level in nearly three years, following growth of 0.8% in December.
Prices increased by 0.2% on a monthly basis, below economists’ forecast for a 0.3% increase.
Core CPI, which excludes volatile food and energy prices, rose 0.8% from a year earlier, down from 1.2% in December.
Official data showed China’s producer price index fell 1.4% from a year ago, better than economists expected a 1.5% decline and a modest decline after a 1.9% drop in December.
Deflation in ex-factory prices has been ongoing for more than three years and is weighing on the profitability of manufacturers, which have weathered production cuts and weak consumer confidence resulting from U.S. trade policies for much of the past year.
The world’s second-largest economy grew 5% last year, in line with Beijing’s official target, thanks to resilient growth in exports to non-U.S. markets.
Since the end of the pandemic, China has struggled to shake deflationary pressure due to a protracted housing crisis and uncertain job market prospects. Authorities are trying to stop price wars between industries, where overcapacity leads to a glut of goods and forces companies to cut prices.
Senior policymakers are expected to announce economic targets for this year at the parliamentary meeting next month.
In a policy report The People’s Bank of China on Tuesday reiterated its determination to implement “appropriately loose” monetary policies to support the economy and guide prices toward a “reasonable recovery.”
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