China’s core inflation cooled to its weakest in more than three years, fueling calls for greater efforts to boost household spending as soft demand puts the annual growth target under pressure.
The consumer price index (CPI) excluding volatile food and energy costs rose just 0.3 percent last month from a year earlier, the least since March 2021, the Chinese National Bureau of Statistics (NBS) said yesterday.
The broader CPI increased 0.6 percent, missing expectations even though it was buoyed by higher food costs due to bad weather last month.
Photo: EPA-EFE
Meanwhile, passenger vehicle sales in China fell last month for the fifth consecutive month — down 1.1 percent from the same month a year earlier to 1.92 million vehicles, data from the China Passenger Car Association showed yesterday.
However, sales of all-electric and plug-in hybrid models rose, helped by subsidies for drivers trading in more polluting vehicles.
Taken together, the figures provide further evidence of weak consumer demand in the world’s second-largest economy, prompting calls for more measures to stave off a negative cycle of declining corporate revenue, wages and spending.
“The deflationary pressure in China is getting more entrenched,” Societe Generale SA greater China economist Michelle Lam (林雪潔) said. “This may well fuel a downward price-wage spiral which will require more radical policy response.”
Weak consumption and investment demand have led to intense price wars in sectors including electric vehicles and solar. That is denting China’s chances of reaching its GDP growth goal of about 5 percent, as consumers delay purchases and businesses slash wages.
Prices of vehicles fell 5.5 percent while those of cellphones and other communications equipment dropped 2.1 percent, official data showed.
“The fiscal policy stance needs to become more proactive in order to prevent the deflationary expectations from becoming entrenched,” Pinpoint Asset Management Ltd (保銀私募基金管理) chief economist Zhiwei Zhang (張智威) said.
The modest rise in consumer prices was driven by higher costs of food because of hot weather and heavy rainfall, chief NBS statistician Dong Lijuan (董莉娟) said in a statement accompanying the release.
Factory-gate prices remained stuck in deflation, as they have been since late 2022, with the producer price index last month sliding 1.8 percent from a year earlier, more than economists’ forecast of a 1.5 percent drop, NBS data showed.
Additional reporting by Reuters
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