China’s consumer prices fell last month at the fastest pace since the global financial crisis, piling pressure on the government to step up support for a stumbling economic rebound that’s roiling markets. The consumer price index dropped 0.8% in January from a year ago, the National Bureau of Statistics said Thursday, the weakest since September 2009. The drop was worse than economists’ expectations for a 0.5% decline.
The fall in consumer prices is a sign of weak demand, and it is the 16th consecutive month that producer prices have fallen. China has been beset by falling prices for much of last year, despite the People’s Bank of China’s efforts to stimulate the economy. Uncertainty over the economy means Chinese households continue to stash money into savings rather than spending, and companies remain wary of making new investments. That’s raising the specter of a tailspin of falling prices and wages from which the economy may not recover.
The Chinese government has been downplaying deflationary fears, but the decline in consumer prices warns of broader deflation, a fear that could drastically hurt the Chinese economy at a time when Beijing is already suffering. Deflation is when a nation faces long-term falling prices at the expense of households’ net worth. The Chinese government has been trying to avoid dropping prices during the 2009 global financial crisis as well as the 2012 period of weak demand in Chinese goods. However, China’s struggle to recover from its strict zero-COVID policies, which ended almost eight months ago, has made it harder for Beijing to refute evidence of deflation.
The fall in consumer prices is a concern for China’s economy, which is already facing drags from deflation and property. The data may support calls for additional stimulus to help growth. China’s economy likely lost some momentum in November, raising expectations for Beijing to ramp up stimulus in the new year. Data is expected to show industrial output weakening from October and a contraction in property investment worsening as efforts to support growth have yet to take hold.
China’s consumer prices have fallen at the fastest pace since 2009, which is a sign of weak demand and a concern for the Chinese economy. The Chinese government is under pressure to step up support for the economy, which is already facing drags from deflation and property. The data may support calls for additional stimulus to help growth.