Beijing: China’s consumer inflation accelerated at its fastest pace in five months in January, driven by increased holiday spending and government incentives. However, producer prices remained in deflationary territory, highlighting ongoing economic challenges.
Consumer Inflation Sees Modest Growth
The consumer price index (CPI) rose 0.5% year-on-year in January, marking an increase from December’s 0.1% gain, according to data from the National Bureau of Statistics (NBS) released on Sunday. The figure surpassed market expectations, as economists in a Reuters poll had predicted a 0.4% rise.
On a monthly basis, CPI edged up 0.7%, following a flat reading in December. However, the increase fell slightly below the forecasted 0.8% gain.
The rise in consumer inflation was attributed to strong holiday-driven consumption during the Lunar New Year period, coupled with government stimulus measures aimed at boosting domestic demand.
Producer Price Deflation Continues
Despite the uptick in consumer prices, China’s producer price index (PPI) remained in negative territory, declining 2.3% year-on-year in January—the same rate of decline recorded in December. The result was slightly weaker than economists’ expectations of a 2.1% drop.
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Persisting deflationary pressures in the industrial sector indicate continued struggles for manufacturers, which could weigh on economic growth in the coming months.
Challenges Ahead for China’s Economy
Economists caution that China’s deflationary risks are likely to persist throughout 2024, particularly if consumer and business demand remains weak. The situation is further complicated by fresh U.S. trade tariffs, which could exert additional pressure on Chinese exports and manufacturing.
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Policymakers are expected to take further measures to stimulate demand and stabilize prices, but global trade uncertainties and structural economic challenges may hinder a quick recovery.
