According to the NBS, food prices continued to be the main drag on the CPI, with prices for pork, fresh vegetables, and fresh fruits falling by 17.3%, 12.7%, and 9.1%, respectively.
On the other hand, non-food prices rose 0.4% from the previous year.
NBS chief statistician Don Lijuan said the year-on-year decline in CPI was due to the high level from 2023 onwards.
“Decrease from previous year [in CPI] “This is mainly due to the fact that last year’s Chinese New Year was in January, as well as the surge in consumer demand after the pandemic prevention and control measures during the same period, which led to higher sales, which raised the standard of comparison.” he said.
China’s CPI also rose by 0.3% in January, but Junyu Tan, Coface’s North Asia regional economist, said the improvement was mainly due to seasonal patterns and was driven by demand. It said the improvement should not be interpreted as a “concrete sign of demand stabilization”. Prices of vegetables and home services rose ahead of the Chinese New Year holiday.
This highlights the critical need for supportive fiscal policy to strengthen domestic demand and prevent a deeper price spiral.
“Looking ahead, moderate reflation is likely to occur in 2024, supported by a favorable low base, and supply-side distortions such as low pork and car prices should ease. “Demand-driven reflation may not take hold yet as confidence remains subdued,” Tan said.
Stephen Innes, managing partner at SPI Asset Management, said concerns about deflation remained evident due to weak domestic demand.
“This highlights the critical need for supportive fiscal policy to boost domestic demand and prevent a more severe downward price spiral,” Innes said.
Meanwhile, China’s Producer Price Index (PPI), which measures the cost of goods before leaving the factory, fell by 2.5% last month compared to the same month last year, and by 2.7% in December, marking the 16th consecutive month of decline. . Wind forecasts had predicted a 2.5% decline.
Dong said the gradual decline in PPI was mainly due to small price declines in coal mining, oil, coal and other fuel processing industries, electrical machinery and electronics.
Unlike many parts of the world that have experienced inflation in the aftermath of the coronavirus pandemic, China is at increased risk of deflation.
Food and energy prices, which together account for 43% of the CPI basket, are estimated to have increased by only 0.2% in 2023, compared to a 2% increase in 2022.
However, price increases in the services sector are more resilient, with an estimated total of 30%.
Cash transfers to households could ease deflation fears in China, analysts say
Cash transfers to households could ease deflation fears in China, analysts say
China’s Bureau of Statistics has previously acknowledged that prices have fallen in sectors such as food and energy, blaming falling prices on international commodity markets and seasonal factors such as weather, but pointing to the risk of deflation. I don’t think that is imminent.
“Whether China’s current year-on-year CPI growth contraction means the economy is in deflation is a controversial issue,” Peng Wansheng, chief economist at China International Capital Corporation, said on Tuesday. on Tuesday, according to comments published by the newspaper. China Chief Economist Forum, a think tank based in Shanghai.
From a domestic environment perspective, the impact of deflation on economic growth should not be underestimated.
Liaoqun, director of the China Chief Economist Forum, said China should not underestimate the impact of deflation risks, adding that in addition to plummeting prices in the real estate and stock markets, the decline in consumer goods prices over the past year He pointed out that this is a major concern.
Liao also said on Tuesday that “after years of rapid economic growth and massive financial expansion, many Chinese consumers and businesses have accumulated large amounts of wealth,” according to the Shanghai-based think tank. you should know.”
“It is not only the amount of income from these assets that determines how much they spend or invest, but also the value of their total assets.
“From a domestic environment perspective, the impact of deflation on economic growth should not be underestimated.”
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