China’s consumer prices fall for first time in over a year

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China’s consumer prices fell in February for the first time in 13 months, in data that was distorted by seasonal factors but suggests deflationary pressures continue to weigh on the world’s second-largest economy.

The consumer price index declined 0.7 per cent in February from a year earlier, the National Bureau of Statistics said on Sunday, deeper than the 0.4 per cent drop expected by economists in a Bloomberg poll.

The statistics office said the earlier than usual lunar new year holiday was the main reason for the decline. Prices tend to increase during the holiday, which falls on a different day every year, as consumers spend more on travel and food.

The holiday started on January 29 this year, compared with February 10 last year. The NBS estimated consumer prices rose 0.1 per cent when adjusted for the lunar new year shift, saying there had been a “mild recovery in prices”.

Lower food costs drove February’s price decline, said the statistics office, as people returned from the holiday and warmer weather increased supplies of fresh vegetables, whose prices fell 12.6 per cent.

Stripping out volatile food and energy costs, China’s core CPI fell for the first time since 2021, declining 0.1 per cent. The data also points to pricing pressure in China’s competitive electric vehicle market, where prices dropped 6 per cent from a year earlier.

Economists will monitor next month’s data release to better understand whether Beijing’s moves to bolster the economy — including a Rmb300bn ($40bn) programme to subsidise appliance purchases — are affecting consumer and corporate expenditures.

On Wednesday, Beijing announced an ambitious GDP growth target of “around 5 per cent” for 2025 during the government’s annual review of economic goals and policies.

It also unveiled Rmb4.4tn in special local government bonds for infrastructure and other investments and Rmb1.3tn in special central government bonds, which economists said was slightly less than anticipated.

In a sign that leaders are aware of the country’s deep deflationary pressures, Beijing set its lowest inflation target in more than 20 years for 2025, aiming for consumer price growth of about 2 per cent, down from last year’s goal of 3 per cent.