Staff sort fruit at a Walmart in Beijing, China. Photo by Reuters/Tingshu Wang
Chinese consumer prices posted their first annual decline in more than two years in July, while ex-factory prices extended their slide, data showed on Wednesday, as sluggish demand weighed on the economy.
The consumer price index (CPI) for the month fell 0.3% year-on-year, the National Bureau of Statistics (NBS) said, a drop slightly slower than the median estimate for a decline 0.4% in a Reuters poll. This is the first year-on-year decline since February 2021. The CPI was unchanged in June.
The producer price index (PPI) fell for a 10th straight month, down 4.4% from a year earlier after falling 5.4% the previous month. This compared to a forecast decline of 4.1%.
China’s economic recovery slowed after a rapid start in the first quarter as domestic and external demand weakened. The authorities have rolled out a series of policy measures to support the economy, and more measures are expected.
Falling consumer prices are of greater concern with mounting deflationary pressures amid slowing economic growth due to the continued slowdown in housing and falling imports and exports.
However, authorities played down concerns about deflation. Liu Guoqiang, vice central bank governor, said last month that there would be no deflationary risk in China in the second half of the year, but noted that the economy needed time to return to normal after the pandemic.
The government has set a consumer inflation target of around 3% this year, up from the 2% recorded in 2022.
Despite recent stimulus, consumers and manufacturers have remained cautious amid a still-weak housing market, high youth unemployment and a dwindling appetite for foreign companies to invest in China.
Investors were eagerly awaiting policymakers to inject stimulus after last month’s powerful Politburo meeting, with the stock market mostly overwhelmed by a lack of concrete action.
