China records fastest deflation in three years
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In November, Chinese consumer prices dropped 0.5% year-on-year, the sharpest fall since 2020.
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Commuters walk across an intersection during the evening rush hour in the central business district in Beijing on June 13, 2023. (AP)
According to statistics published on Saturday by China's National Bureau of Statistics, consumer price decreases in China quickened last month, indicating that the country's post-pandemic economic recovery may take longer than originally anticipated.
The consumer price index (CPI) decreased 0.5% year on year in November, the largest reduction since November 2020. Consumer prices have been influenced in part by a drop in pork prices, which is a substantial component of China's CPI basket due to its popularity among consumers. Last month, overall food costs in the country fell by 4.2%.
Producer prices, which are heavily influenced by commodity and raw material costs, fell by 3% as well, a change from the previous 14 months.
According to Zhang Zhiwei, chief economist at Pinpoint Asset Management, deflationary forces are on the rise as a result of sluggish domestic demand.
The economist told Bloomberg, “This highlights the importance of more supportive fiscal policy."
While the bulk of the world's countries have struggled with inflation this year, researchers warn that China's plummeting prices might be just as problematic. Deflation can cause a slowdown in economic activity and halt growth since individuals are likely to buy less because they expect prices to fall further, and firms may begin to curtail output and investment owing to falling demand.
Most analysts predict that China will fail its 3% annual inflation target this year, and that deflation will likely endure throughout the first half of 2024.
