China’s consumer inflation dropped below zero fo the first time ever in 13 months, a Bloomberg report said. The Consumer Price Index (CPI) declined by 0.7% last month from last year, according to the data published by China’s National Bureau of Statistics. The data also showed a reverse a year-on-year gain of 0.5% in January.
According to Goldman Sachs, consumer inflation in China dropped to the weakest levels in past few months, even after taking the Lunar New Year holiday into account, reported Bloomberg. Showing signs o sluggish consumption, the Bloomberg report said that there was a decline in prices for services and an unusual negative reading of core inflation.
The Bloomberg report further said that China’s core CPI, which excludes things like food and energy, fell by 0.1%. This was the first time it had dropped since 2021 and only the second time in more than 15 years. Factory prices continued to fall for the 29th month in a row.
China sees drop in consumer prices in February
The high base from a year earlier which was a result of increased prices caused by Lunar Year spending, was a key factor in the decline of inflation, according to the statistics bureau, reported Bloomberg. Lunar Year festival ran from January 28 to February 4 this year.
The statistics bureau estimated that when adjusting for seasonal factors, consumer inflation in China actually went up by 0.1% in February compared to the previous year, the report added further. Goldman Sachs economists believe that the earlier Lunar New Year holiday reduced year-over-year inflation by 0.7% points, the Bloomberg report said.
A clearer picture of China’s inflation will appear in March, as investors look for signs that the government’s stimulus is leading to higher domestic demand. The country is experiencing the longest period of falling prices since the 1960s due to weak spending, and the property market has not yet recovered.
China has set its inflation target at the lowest level in over 20 years, aiming for about 2% inflation in 2025, down from the previous 3% target. This shows that China’s leaders are starting to acknowledge the deflationary pressures on the economy, with consumer inflation stuck at just 0.2% for the past two years, the Bloomberg report said.
