China’s consumer price inflation in December fell to 0.1% over one yearData from the National Bureau of Statistics showed on Thursday, stoking fears of deflation.
Headline inflation growth was in line with Reuters estimates, but lower than November’s 0.2% rise. The core CPI, which excludes food and energy prices, rose 0.4% year-on-year, compared with a 0.3% rise in the previous month, the data showed.
On a monthly basis, China’s CPI remained stable, compared to the previous month’s 0.6% decline.
Food prices fell 0.6% month-on-month due to favorable weather conditions, according to official statistics. Prices of fresh fruit and vegetables fell by 2.4% and 1% respectively. Prices for pork, which makes up a large part of the CPI basket, fell 2.1%.
“The overall CPI will be negatively impacted by the decline in pork prices in 2025,” ANZ Bank analysts wrote in a note. Over one year, the prices of pork and fresh vegetables remain high, increasing by 12.5%.
Wholesale prices continued to fall for the 27th consecutive month, with China’s producer price inflation falling 2.3% year-on-year in December. This figure is slightly better than Reuters estimates of a 2.4% decline.
On a monthly basis, the PPI fell 0.1% compared to a 0.1% rise in November as infrastructure and real estate projects were temporarily suspended during the low season, the National Bureau of Statistics said. which hurt demand for steel.
Consumer inflation near zero indicates that China continues to struggle with weak domestic demand that raises the specter of deflation.
Consumption has failed to recover despite a series of stimulus measures introduced by Beijing since last Septemberwhich included interest rate reductions, support for stock and real estate markets, and increased bank lending.
As recently as Wednesday, China expanded its consumer recovery program aimed at boosting consumption through modernization of equipment and subsidies.
These subsidies are “a sort of silver bullet” targeting specific products, but do little for broader consumption, said Louise Loo, senior economist at Oxford Economics.
“There is [also] significant feedback effects later, meaning what is spent now will not be spent later,” she said on CNBC’s “Street Signs Asia.”
Shaun Rein, managing director of China Market Research Group, said that while China’s scrappage program has merit, it is not enough to revive the retail sector: “How many air conditioners can a family have?
“Deflation poses a serious threat to China’s economy ahead of the Chinese New Year, as consumers look for bargains when buying gifts for family members,” he said via email to CNBC. Consumers will continue to expect big discounts and will only buy when they get them, Rein observed.
However, some indicators indicate that the Chinese economy could experience some recovery. The country the factory’s activity has grown over the past three months, although the pace of expansion slowed in December.
“Although the Chinese economy has shown some signs of recovery after the September policy change, it still faces significant challenges,” said Carlos Casanova, senior economist at private bank Union Bancaire Privée, citing headwinds from the country’s real estate sector and trade tensions with the United States.
Loo, senior economist at Oxford Economics, expects China’s trajectory toward reflation to remain lower than most estimates, given continued weakness in consumer appetite for spending.
China earth yuan On Wednesday, it hit a 16-month low of 7.3316 against the dollar as Treasury yields rose and the dollar strengthened.
