Chinese consumer prices rose in February for the first time since August. Data shows that on Saturday (9/3). This bucked months of deflation that exacerbated the country’s economic woes.
The world’s second-largest economy recorded its lowest growth in decades last year and is battling a prolonged property sector crisis and soaring youth unemployment. But in a rare occurrence, official statistics on Saturday showed the consumer price index rose 0.7% last month. According to data from the Beijing National Bureau of Statistics (NBS), this is the first increase since August.
The figure was higher than the 0.3% increase expected by analysts polled by Bloomberg. That’s also a sharp improvement from the 0.8% drop seen in January, the sharpest in more than 14 years.
The positive data came as senior officials met in Beijing for the annual Two Sessions of China’s parliament and its main political consultative body. The meeting was dominated by economic and national security issues.
On Tuesday, Premier Li Qiang said that uniting the country would achieve five percent growth by 2024. This was an ambitious goal that he acknowledged would not be easy given the challenges facing the economy.
One of the biggest problems is deflation which China experienced last July for the first time since 2021. Apart from a brief increase in August, prices did not rise until last month.
Also read: Eurozone inflation continues to fall in February
Consumer prices typically increase during the Chinese New Year period, also known as the Spring Festival, which falls in February this year. “What is highest is the price of food and services,” NBS statistician Dong Lijuan said in a statement.
“During the Spring Festival period, consumer demand for food products increases. In addition, rainy and snowy weather in some regions affects supply,” Dong said.
Demand is still weak
Falling prices in China are in stark contrast to the rest of the world. Other countries experience inflation which is still a constant threat, forcing central banks to raise interest rates.
Also read: Chinese Business Expands Employment and Stabilizes Housing Market
Although deflation means goods are cheaper, it poses a threat to the broader economy as consumers tend to delay purchases. They hope there will be further reductions.
A lack of demand might force companies to cut production, freeze hiring or lay off workers, and potentially also have to discount existing stock, thereby reducing profitability even though costs remain the same. Given the holiday factor, one analyst cautioned once morest viewing Saturday’s numbers as an indication that China is no longer fighting deflation.
“I think it’s too early to conclude that deflation in China is over,” said Zhiwei Zhang, president and chief economist at Pinpoint Asset Management. “Domestic demand is still quite weak. Sales of new apartment properties are not yet stable,” he explained.
Producer prices continued to fall in February by 2.7%. “Affected by the Spring Festival holiday and other factors, industrial production is at its usual slow period,” Dong said.
Investors are calling for greater action from Beijing to shore up the sluggish economy. Despite calls for broader stimulus measures, Beijing indicated this week that it was unlikely to commit to a major bailout by setting a fiscal deficit-to-GDP target of three percent similar to last year. (AFP/Z-2)
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