BEIJING- China’s consumer prices barely rose in 2024 while factory-gate prices extended into a second straight year of declines, official data showed on Thursday, weighed by persistently weak domestic demand.
A combination of job insecurity, a prolonged housing downturn, debt and tariff threats from the incoming administration of US President-elect Donald Trump has hit demand, even as Beijing ramps up stimulus.
The full-year consumer price index (CPI) rose 0.2 percent, data from the National Bureau of Statistics showed, in line with the previous year’s pace and well below the official target of around 3 percent for last year, suggesting inflation missed annual targets for the 13th straight year.
In December, the CPI crept up 0.1 percent year-on-year, slowing from November’s 0.2 percent increase and the weakest pace since April. That was in line with forecasts in a Reuters poll of economists.
However, core inflation, which excludes volatile food and fuel prices, nudged up slightly to 0.4 percent last month from 0.3 percent in November, the highest in five months.
Upstream, the producer price index fell 2.3 percent year-on-year in December, slower than the 2.5 percent fall in November and an expected 2.4 percent decline. Factory-gate prices have remained deflationary for 27 straight months.
The pickup in core consumer prices and the slower pace of factory deflation suggested “policy stimulus is providing some support to demand and prices,” said Julian Evans-Pritchard, Head of China Economics.
“But with the prop from stimulus likely to be short-lived, we think underlying inflation will drop back again later this year.”
In addition to an electric vehicle price war that is entering its third year, discounting is now broadening across the retail sector to include bubble tea shops and other discretionary items.
Cautious consumers are increasingly opting to rent items, such as cameras and handbags, instead of buying them.
“The deflationary pressure is persistent,” said Zhang Zhiwei, president and chief economist at Pinpoint Asset Management.
“The property sector downturn has not ended, which continues to weigh on consumer sentiment,” he said. “The inflation outlook to a large extent depends on the effectiveness of the fiscal policy.”
In late December, the World Bank upgraded its forecast for China’s economic growth in 2024 and 2025 but warned that subdued household and business confidence, along with property sector headwinds, would remain a drag.
