Chinese consumer prices suffer quickest drop in 14 years

CHINESE consumer prices fell in January at their quickest rate in more than 14 years, data showed Thursday, piling pressure on the government for more aggressive moves to revive the country’s battered economy.

Officials have struggled for months to kickstart economic growth as they battle a range of headwinds, including a prolonged property-sector crisis, soaring youth unemployment and a global slowdown that is hammering demand for Chinese goods.

Policymakers have in recent months announced a series of targeted measures as well as a major issuance of billions of dollars in sovereign bonds, aimed at boosting infrastructure spending and spurring consumption.

But that, and recent announcements including central bank interest rate cuts and measures to boost lending, have had little impact so far.

And analysts warn a “bazooka” stimulus plan is needed to restore confidence.

“China needs to take actions quickly and aggressively to avoid the risk of deflationary expectation to be entrenched among consumers,” Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, said.

January’s 0.8 percent drop in the consumer price index, announced by the National Bureau

of Statistics, marked the fourth straight month of deflation and was much bigger than the 0.5 percent fall forecast in a survey by Bloomberg News.

The reading was the worst since the second half of 2009, during the global financial crisis.

And a 2.5 percent plunge in the producer price index -- which measures the cost of goods leaving factories -- signalled continued weakness.

China slipped into deflation in July for the first time since 2021 and, apart from a brief rebound in August, have been in constant decline since.

“The primary drag on inflation continued to be food prices, which fell by 5.9 percent year-on-year, the lowest level on record,” said Lynn Song, Chief Economist for Greater China at bank ING.

However, he pointed to figures showing costs rising month-on-month.

“While a far cry from the above-target inflation levels seen in many other economies, these numbers do not imply China is stuck in a deflationary spiral,” Song said in a note.

“We see a high likelihood that January’s data could mark the low point for (year-onyear) inflation in the current cycle.”

China’s sinking prices are in stark contrast with the rest of the world, where inflation remains a persistent bugbear, forcing central banks to ramp up interest rates.