China: Weak Demand Pushes CPI Down for the First Time over a year

 



BEIJING (AP) — China's consumer prices fell for the first time in 13 months in February, as weak demand continued due to the early timing of the Lunar New Year holiday.

The National Bureau of Statistics said Sunday that the consumer price index fell 0.7% in February compared to last year. On a monthly basis, prices fell 0.2% from January.

While many other countries are struggling with inflation, policymakers in China are facing stable or low prices and the possibility of them developing into a deflationary spiral that would drag the economy downward. The government emphasized the need to boost domestic demand and consumer spending in an annual report it delivered last week to its ceremonial legislative body, the National People's Congress, but refrained from revealing any dramatic new steps to boost the economy.

The Lunar New Year, a time when spending on travel, dining out, and entertainment increases, fell in late January this year instead of February because it relies on lunar cycles. Holiday spending helped push the CPI up 0.5% in January, but it subsequently declined last month compared to the 2024 high.

The index rose 0.1% last month after excluding the holiday effect, Dong Liguan, a statistician at the State Statistics Bureau, said in a written analysis.

This is still far less than ideal. The government's annual report last week included a 2% inflation target for this year, but it is likely to be significantly lower than that target. The consumer price index was flat in 2024, rising 0.2%.

Dong said that besides the start of the Lunar New Year, two other factors contributed to the February price drop: Better weather boosted agricultural production, leading to lower prices for fresh vegetables, and automakers intensified promotions to try to boost sales and lower prices for new cars.

The Bureau of Statistics said the Producer Price Index, which measures the wholesale price of goods, fell 2.2% in February. Producer prices have been falling more sharply than consumer prices, putting pressure on businesses to cut labor and other costs.

The falling prices are a symptom of weak consumer spending and the massive expansion of factories to build electric vehicles, solar panels, and other green energy products, encouraged by government subsidies.

The escalating trade war with the United States could add to China's economic challenges, which include a protracted property market crisis that is weighing on consumer confidence.

Government ministers, speaking to reporters at the National People's Congress on Sunday, pledged continued efforts to stabilize the property market and said expanding job opportunities in the current economic environment would be a "heavy task."

Wang Xiaoping, Minister of Human Resources and Social Security, said the employment situation is showing signs of improvement, but the foundation for economic recovery remains unstable.

"The pressures on total employment remain unchanged," she said, noting that people are facing difficulties in finding work and increasing their incomes.

Ni Hong, minister of housing and urban-rural development, said part of this year's 4.4 trillion yuan ($600 billion) special local government bonds will go to purchasing completed but unsold housing projects and converting them into affordable housing, youth apartments, employee housing and other uses.

He added that the government will also expand its old housing rehabilitation program, including adding all complexes built before 2000 to the urban renewal plan.

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