China's consumer inflation falls below zero for first time in 13 months
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The news: China’s Consumer Price Index (CPI) fell further than expected in February, dropping below negative for the first time in 13 months.
The numbers: The country’s National CPI declined 0.7%, lower than forecasts which had predicted a 0.4% drop.
The context: The National Bureau of Statistics (NBS) attributed the lower monthly spending to the earlier than usual lunar new year holiday, which fell on January 29 this year, compared with February 10 in 2024. Prices usually rise during the holiday as consumers spend on travel and food, and the NBS estimated that prices rose 0.1% when adjusted for the shift in the holiday date.
Lower food costs also impacted the price decline for February, the NBS said, as people returned from the holiday period and an increased supply of fresh vegetables brought on by warm weather saw the fresh produce prices fall by 12.6%.
China’s core CPI which excludes items including food and energy decreased for the first time since 2021, falling 0.1%, marking only the second time the gauge has contracted in more than 15 years.
China is aiming to bring consumer price growth to around 2% next year, lower than its previous 3% target, and its lowest target in over 20 years. The goal signals that leaders are acknowledging the country’s deep deflationary pressures.
Last week during the country’s ‘Two Sessions’ gathering, Beijing announced that it will aim for a 5% GDP growth target in 2025, in line with last year’s target.
What they said: Bloomberg economist David Qu said that the price data for February highlights “slack demand and an urgent need for policymakers to deliver on pledged stimulus quickly. Without a powerful boost from fiscal and monetary policies, deflationary pressures will continue to weigh on the economy.”
The sources: China National Bureau of Statistics, Bloomberg
