Customers buy fruit at a supermarket on December 9, 2024 in Qingzhou, Shandong Province, China.
Vcg | Visual China Group | Getty Images
China's consumer price inflation slowed to a plateau in December 0.1% year on yeardata from the National Bureau of Statistics showed on Thursday, fueling fears of deflation.
The rise in headline inflation was in line with Reuters estimates, but smaller than the 0.2% rise in November. Core CPI, which excludes food and energy prices, rose 0.4% year-on-year compared to a 0.3% rise in the previous month, data showed.
On a monthly basis, China's CPI was unchanged from a decline of 0.6% in the previous month.
Official statistics show food prices fell by 0.6% month-on-month as a result of favorable weather conditions. Prices of fresh vegetables and fruit fell by 2.4% and 1%, respectively. Pork prices, which constitute a significant part of the CPI basket, fell by 2.1%.
“The headline CPI will be negatively impacted by a weaker pork price in 2025.” – ANZ Bank analysts wrote in a note. Year-on-year, prices of pork and fresh vegetables remain high and increased by 12.5%.
Wholesale prices continued to fall for the 27th consecutive month, and China's producer price inflation in December fell 2.3% year-on-year. The reading was slightly better than Reuters estimates of a 2.4% decline.
On a monthly basis, PPI fell 0.1% compared with a 0.1% gain in November as infrastructure and real estate projects were temporarily suspended in the off-season, the Office for National Statistics said, hurting steel demand.
Consumer inflation remaining close to zero indicates that China continues to struggle with weak domestic demand, which has raised the specter of deflation.
Consumption has not picked up despite a series of stimulus measures introduced by Beijing since then in September last yearwhich included interest rate cuts, support for stock and real estate markets, and increased bank lending.
Just on Wednesday, China expanded its consumer trade program aimed at boosting consumption equipment modernization and subsidies.
However, some indicators signal that the Chinese economy can expect some recovery. Country the factory's operations were developing for the last three months, although the pace of expansion slowed in December.
“While China's economy has shown some signs of recovery following September's policy change, it still faces significant challenges,” said Carlos Casanova, senior economist at private bank Union Bancaire Privée, citing difficulties in the country's real estate sector and trade tensions with the U.S.
Louise Loo, chief economist at Oxford Economics, expects China's path to reflation to continue to be understated by most estimates, given continued weak appetite for consumer spending.
China land yuan on Wednesday, it hit a 16-month low of 7.3316 against the dollar as Treasury yields rose and the dollar strengthened.