China consumer prices continue to fall
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The news: Both China’s consumer and producer prices fell in January, as the world’s second-largest economy continues to struggle with persistent deflation pressures, Bloomberg has reported.
The numbers: The consumer price index dropped 0.8% during the month, compared to a year ago, worse than economist expectations of 0.5%. The producer price index fell 2.5%, a slightly improved figure from the 2.6% decline projection.
Factory-gate costs have been stuck in deflation for 16 consecutive months and consumer prices are dropping at the fastest pace since 2009. Deflation pressure is expected for another six months.
The context: The country has been struggling to revive domestic demand and consumer confidence. Continued deflation risks people holding off on purchases as they expect prices to drop and this leads to a dent in overall consumption and spills over to businesses.
Bloomberg noted the property crisis remained the biggest drag on the economy and confidence. The Chinese stock market is also in the midst of a multi-trillion dollar rout and while equities have rallied, recently, investors are waiting for more policy support from Beijing.
The source: Bloomberg
