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China’s Consumer Prices Rise For the First Time in Six Months

Analysts warn that a full-throttled recovery is still not in the cards for China, and that “it is too early to conclude” that deflation was over in the world’s second-largest economy

Travellers walk with their luggage outside the Beijing railway station during the Spring Festival travel rush following the eight-day Lunar New Year holiday, in Beijing, China
Travellers walk with their luggage outside the Beijing railway station during the Spring Festival travel rush following the eight-day Lunar New Year holiday, in Beijing, China. Photo: Reuters


China’s consumer prices charted a small recovery last month easing concerns over deflation in the world’s second-largest economy, even as factory-gate prices fell again.

The consumer price index (CPI) climbed for the first time in six months to 0.7% in February, data from the National Bureau of Statistics (NBS) showed on Saturday

The year-on-year growth in consumer prices was also the highest in 11 months, buoyed by gains in some key foodstuffs such as pork and fresh vegetables, as well as travel amid a seasonal rush around Lunar New Year in February, according to the NBS data.


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The bounce into positive territory contrasted with the 0.8% fall in January, the steepest drop in over 14 years, due to a higher statistical base in January 2023 as the Lunar New Year arrived earlier that month and boosted spending.

While other recent indicators, such as much stronger-than-expected trade figures this week, have suggested improvement in some parts of the economy, analysts warn that a full-throttled recovery is not yet in the cards.

“It is 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. Property sales of new apartments have not stabilised yet.”


Continued weakness in factory-gate prices

The month-on-month rise in CPI stood at 1.0%, outpacing the 0.3% uptick in January.

But the producer price index (PPI) fell 2.7% from a year earlier for the month, versus a 2.5% drop in January. China’s producer prices have been in the decline for more than a year-and-a-half.

The risk of deflation due to continued weak demand remains one of the main drags on China’s overall growth.

In January-February, CPI was unchanged from a year earlier, with food prices down 3.4% and non-food prices 0.9% lower.

China has been grappling with sub-par growth over the past year amid an entrenched debt crisis among the country’s property developers that had crushed home-buying sentiment and rocked what was once a mighty pillar of the economy.

Weak international trade flows, declining domestic investment, and high local government debt further sapped economic growth. Policymakers have pledged to roll out new measures, promising to unleash “new productive forces”.



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Premier Li Qiang on Tuesday announced an ambitious economic growth target of around 5%, although economists said the goal would be harder to reach. The International Monetary Fund has predicted China’s growth to ease to 4.6% from 5.2% last year.

Li also set a 2024 inflation target of 3%, in line with goals set since 2015. Consumer prices rose 0.2% last year, missing the government’s target.

“We only expect a modest recovery in CPI and PPI inflation despite the CPI inflation target of 3%, and a deeper property downturn may pose greater deflationary risk,” said economists at UBS in a research note this week.


  • Reuters, with additional editing by Vishakha Saxena


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Vishakha Saxena

Vishakha Saxena is the Multimedia and Social Media Editor at Asia Financial. She has worked as a digital journalist since 2013, and is an experienced writer and multimedia producer. As a trader and investor, she is keenly interested in new economy, emerging markets and the intersections of finance and society. You can write to her at [email protected]


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