Source: AFP
Chinese consumer prices rose in February for the first time since August, data showed on Saturday, offsetting a prolonged period of deflation that has worsened the country’s myriad economic woes.
The world’s second-largest economy last year saw some of its slowest growth in decades and is battling a protracted housing crisis and rising youth unemployment.
But in a rare bright spot, official statistics on Saturday showed that the consumer price index rose 0.7 percent last month, according to Beijing’s National Bureau of Statistics (NBS) — the first increase since August.
The number was higher than the 0.3% rise expected by analysts surveyed by Bloomberg and a sharp increase from the 0.8% decline seen in January, their biggest decline in more than 14 years.
The positive data comes as senior officials meet in Beijing for the annual “Two Sessions” of China’s parliament and its top political advisory body, gatherings dominated by the economy and national security.
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On Tuesday, Premier Li Qiang said the country’s rally would aim for five percent growth in 2024 — an ambitious goal he acknowledged would not be “easy” given the headwinds facing the economy.
High among those issues was deflation, which China entered last July for the first time since 2021.
Apart from a brief recovery in August, prices had not risen until last month.
Consumer prices traditionally rise during the Chinese New Year, also known as the Spring Festival, which fell in February this year.
“It was mainly food and service prices that rose the most,” NBS statistician Dong Lijuan said in a statement.
“During the Spring Festival period, consumer demand for food products increased, in addition to rainy and snowy weather in some areas affecting supply,” Dong said.
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Demand remains weak
China’s plunging prices stand in stark contrast to the rest of the world, where inflation remains stubbornly illegal, forcing central banks to raise interest rates.
While deflation suggests that goods were cheaper, it poses a threat to the wider economy as consumers tend to postpone purchases, hoping for further reductions.
Lack of demand can then force companies to cut production, freeze hiring or lay off workers, while potentially also having to discount existing stock — reducing profitability even as costs remain the same.
Given the holiday factor, one analyst warned that Saturday’s data suggested China was no longer facing 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. Real estate sales of new apartments have not stabilized yet,” he explained.
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And producer prices continued to decline in February, falling 2.7 percent, the NBS said.
“Influenced by the Spring Festival holiday and other factors, industrial production was in the traditional off-season,” Dong said.
Investors have called for much greater action from Beijing to prop up the economy’s flag.
But despite calls for wider stimulus, Beijing said this week it was unlikely to resort to major bailouts, setting a budget deficit-to-GDP target of 3 percent, similar to last year.
Source: AFP