China's consumer prices have plummeted at the quickest rate in 15 years this January, pushing the world's second-largest economy further into deflation due to weakening demand. The consumer price index tumbled last month, dropping by 0.8% compared to the previous year. This marks the fourth consecutive month of decline and the steepest fall since September 2009.
Food prices, which fell by 5.9% annually, significantly impacted the headline inflation figure. Fresh vegetables and fruit prices fell by 12.7% and 9.1% respectively. China's economy has been battling to recover from the Covid-19 pandemic, and the contraction in its indebted property sector has dealt a significant blow, leading to the liquidation of developer Evergrande last month.
ING's chief economist, Lynn Song, noted that the data might be skewed due to the lunar new year falling in February this year, which could see a bounce back in demand for food such as pork. Song added, “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.”
Despite the economic concerns, the prospect of further economic stimulus from Beijing sent Chinese stocks higher, with the Shanghai Composite rising by nearly 1.3%. Kyle Rodda, a senior financial market analyst at capital.com, suggested that "the markets see the terribly low number as a potential catalyst for more muscular monetary or fiscal stimulus from the central government."
Source: theguardian.com
