Prime Highlights:
China’s consumer price inflation in December dropped to 0.1%, less than the previous month’s 0.2% rise.
Core CPI, excluding food and energy, increased by 0.4% year-on-year, slightly up from 0.3% in November.
Key Background:
China’s consumer inflation saw a further slowdown in December, with the year-on-year increase dropping to just 0.1%, according to data released by the National Bureau of Statistics. This figure matched analyst expectations but marked a decline from November’s 0.2% rise. The core Consumer Price Index (CPI), which excludes volatile food and energy prices, recorded a slightly higher increase of 0.4%, compared to 0.3% the previous month.
On a month-on-month basis, the CPI remained flat after a 0.6% decline in November. The drop in food prices, which fell by 0.6%, contributed to this moderation. The prices of key food items such as pork, vegetables, and fruits experienced notable reductions, with pork prices decreasing by 2.1%.
Meanwhile, China’s producer price inflation (PPI) continued its downward trend, falling 2.3% in December, marking the 27th consecutive month of decline. While this was slightly better than the expected 2.4% drop, PPI showed minimal signs of improvement, exacerbated by subdued demand, particularly in the steel sector, due to temporary suspension of infrastructure and real estate projects.
The persistent low inflation signals underlying concerns regarding weak domestic consumption, despite a range of stimulus measures, including rate cuts and subsidies, aimed at spurring economic activity. Analysts are increasingly worried about deflation risks, particularly as consumer spending remains lackluster heading into the Chinese New Year. While some recovery signs are evident in factory activity, the broader outlook remains uncertain, hindered by a sluggish property sector and strained international trade relations. Experts caution that China’s deflationary pressures may persist, with weakened consumer confidence continuing to challenge the country’s path to economic recovery.
