China’s consumer price index suffers biggest decline since 2009 as deflation deepens

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China’s consumer prices have slipped deeper into deflationary territory, suffering the biggest decline since the height of the global financial crisis in 2009. But analysts say the sharp decline is mainly due to seasonal issues and that the decline may have already bottomed out.

The country’s consumer price index (CPI), which measures price changes in goods and services purchased by urban households for consumption, fell 0.8% year-on-year in January, the National Bureau of Statistics (NBS) said on Thursday. . .

This was the largest decline in the index since September 2009, and the fourth consecutive month of decline.

NBS and some economists attribute the sharp decline in part to the high comparison base from last year, when prices were particularly high due to holiday demand.

“[The] Economists at HSBC said in a research note on Thursday that the base is distorted because Lunar New Year falls in February this year compared to the end of January last year.

In 2023, mainland China celebrated the Lunar New Year from January 21 to January 27, and the CPI increased by 2.1% that month.

Economists said consumer demand was weak in January 2024 Prices also weighed on the market.

grocery prices Last month in particular was a big drag on the index. The price of pork, a staple of the Chinese diet, fell 17.3% year-on-year, the largest decline of all consumer items. Vegetable prices fell by nearly 12%.

Lin Song, chief economist for Greater China at ING Economics, said consumer prices are likely to rise from February onwards.

“The base effect makes January’s data look worse than it actually is. Sequential data paints a brighter picture,” Song said.

Compared to December, CPI actually increased by 0.3% in January, marking the second consecutive month of increases.

pork drag Song said prices are also likely to fall in the coming months as holiday demand could push up meat prices. China will be celebrating the Lunar New Year starting Saturday.

“Given the more favorable underlying effects of the February data, we see a strong possibility that the January data will represent the lowest point in (year-on-year) inflation for the current cycle.”

— This is a developing story and will be updated.