China's Consumer Prices Suffer Biggest Fall Since 2009 As Deflation Risks Stalk Economy

• China's consumer prices fell at their steepest pace in more than 14 years in January, while producer prices also dropped, ramping up pressure on policymakers to do more to revive an economy low on confidence and facing deflationary risks.
• The world's second-biggest economy has been grappling with slowing prices since early last year, forcing policymakers to cut interest rates to spur growth even as many developed economies were focused on taming stubbornly high inflation.
• The consumer price index (CPI) fell 0.8% in January from a year earlier, after a 0.3% drop in December, data from the National Bureau of Statistics (NBS) showed on Thursday. The CPI rose 0.3% month-on-month from a 0.1% uptick the previous month. Economists polled by Reuters had forecast a 0.5% fall year-on-year and a 0.4% gain month-on-month.
• The annual CPI decline in January was the biggest since September 2009, mainly led by a sharp drop in food prices, but analysts warn the overall deflationary impulse in the economy risks becoming entrenched in consumer behaviour.
• "The CPI data today shows China faces persistent deflationary pressure," said Zhiwei Zhang, chief economist at Pinpoint Asset Management. "China needs to take actions quickly and aggressively to avoid the risk of deflationary expectation to be entrenched among consumers."
• The Asian giant has struggled to regain economic momentum since the end of COVID curbs in late 2022, and nervous investors have dumped Chinese stocks amid a deepening property crisis and local government debt risks. Global demand has also remained relatively soft, with an official survey showing activity in China's vast manufacturing sector contracting in January.

 (Source: Reuters)