Economy 16:45 11/12/2023 World

China struggling to stem deflation

While many central banks around the world are still trying to cool inflation, China is grappling with falling prices, CNN reports.

The Consumer Price Index (CPI) dropped 0.5% in November on an annual basis, the biggest fall since the depths of the pandemic three years ago, according to data released by China’s National Bureau of Statistics on Saturday.

The drop marked an acceleration in the rate of deflation from October, when the CPI fell 0.2% from a year earlier, and prompted calls for urgent action from Beijing to boost demand and prevent a downward spiral of prices.

The data come days after Chinese policymakers vowed to strengthen fiscal and monetary support to boost the world’s second biggest economy, which is struggling with a real-estate crisis, high youth unemployment and subdued consumer confidence.

China has been fighting weak prices for most of this year due to the property market slump and weak spending. Deflation is bad for the economy because consumers and companies may put off purchases or investments in anticipation of prices falling further. That in turn could further slow the economy, and create a vicious cycle.

Consumer inflation began slowing in February and turned negative in July for the first time in more than two years. It returned to positive territory in August and was flat in September, but fell back below zero in October.

“China’s deflation situation is deepening with the triple whammy from domestic food prices, international oil price corrections and weak domestic demand,” analysts from Citi said in a Sunday report.

“Signs of price weakness are now spreading from goods to services,” they added.

Food prices were a major drag on the CPI, down 4.2% in November from a year earlier. In particular, pork prices plummeted 31.8%.

Gasoline prices declined after international oil prices hit their lowest level in months in November.

Services inflation also slowed. It was up just 1% from a year ago last month, compared with a 1.2% increase in October.

The Producer Price Index (PPI), which is mainly driven by prices of commodities and raw materials, dropped 3% in November, down for 14 months in a row.



Source Panorama.am
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