Customers buy fruit at a supermarket on December 9, 2024 in Qingzhou, China’s Shandong province.
VCG | Visual Group China | Getty Images
Consumer prices in China in December up slightly by 0.1% over one year, in line with expectationsData from the National Bureau of Statistics showed on Thursday, but the slower rise compared to the previous month fueled fears of deflation.
Analysts polled by Reuters expected the consumer price index to fall to 0.1% in December from 0.2% in November year on year.
China’s producer price inflation fell 2.3% year-on-year in December, the 27th month of decline. This figure is slightly better than Reuters estimates of a 2.4% decline.
Consumer inflation near zero indicates that China continues to struggle with weak domestic demand that raises the specter of deflation.
Consumption has failed to recover despite a series of stimulus measures introduced by Beijing since last September, which included interest rate cuts, support for stock and property markets and increased bank lending.
As recently as Wednesday, China expanded its consumer recovery program aimed at boosting consumption through modernization of equipment and subsidies.
However, some indicators indicate that the Chinese economy could experience some recovery. The country’s industrial activity has been expanding for three months, although the pace of expansion slowed in December.
“Although the Chinese economy has shown some signs of recovery after the September policy change, it still faces significant challenges,” said Carlos Casanova, senior economist at private bank Union Bancaire Privée, citing headwinds from the country’s real estate sector and trade tensions with the United States.
Louise Loo, senior economist at Oxford Economics, expects China’s path to reflation to remain lower than most estimates, given continued weakness in consumer appetite for spending.
China’s yuan hit a 16-month low of 7.3316 against the dollar on Wednesday, as Treasury yields rose and the dollar strengthened.
