Beijing: The China Consumer Prices (ICC) index in February missed expectations and dropped to the most clear rate in 13 months, while the price deflation of producers persisted, because seasonal demand was forced and households remained cautious about expenses in the middle of professional concerns and income.
Last week, Beijing deemed greater efforts to stimulate consumption in the face of climbing the trade war with the United States, but analysts expect deflationary pressures in the second world economy.
The government set the economic growth target of 2025 to About 5%Unchanged from last year, while reducing the annual inflation objective to around 2% compared to around 3% last year.
The IPC dropped 0.7% last month compared to the previous year, reversing a 0.5% increase in January, according to data from the National Bureau of Statistics (NBS).
It was the first contraction of the index since January 2024, and worse than a slide of 0.5% estimated by economists in a reuters survey.
“The Chinese economy always faces deflationary pressure. Although the feeling has been improved by developments in technological space, domestic demand remains weak,” said Zhiwei Zhang, president and chief economist at PointPoint Asset Management.
Since exports are risky of the trade war, budgetary policy must become more proactive, he said, noting that the Chinese real estate sector also continues to fight.
“Monetary policy must also be more loosened with reductions in interest and reserve rate ratio, as indicated by the government work report.”
Basic CPI, excluding volatile prices for food and fuel, dropped by 0.1% in February, the first fall since January 2021.
Food prices dropped 3.3% last month, against an increase of 0.4% in January. The Lunar New Year Celebrations, the country's biggest annual holidays, took place at the end of January compared to February from last year, leading to higher food prices and at the prices of tourist services in January.
The NBS statistician, Dong Lijuan, said in a note on Sunday that the high base of the ICC last February caused the index in the fall last month: “If excluding the impact of the various lunar New Year months, the IPC increased by 0.1% in annual shift in February.”
On a monthly basis, the IPC dropped by 0.2% against an increase of 0.7% in January and less than a planned drop of 0.1%.
To revive the demand of slow households, China has doubled its allowance to a widely subsidy program for electric vehicles, household appliances and other goods at 300 billion yuan (41.42 billion US dollars) this year.
But deeper measures to respond to its incomplete social protection system are still outside the end, leaving consumers and businesses beware of spending in the midst of an economic rebound in the Braquine.
The main problems reside in “a low consumption capacity and a desire,” said the Minister of Commerce, Wang Wentao, Thursday, March 6) on the sidelines of the annual parliamentary meeting.
In this year's government's work report revealed on March 5, consumption was mentioned 31 times, against 21 last year, exceeding references to technology.
The price index of producers dropped by 2.2% over the year in February, going from a slide of 2.3% in January and from the smallest contraction in six months, but missing the drop in forecasts of 2.1%.
Chinese producers have been falling since September 2022.
Global pricing threats and industrial overcapacity at home push Chinese exporters in price wars around the world, forcing many of them to reduce the prices of their products and wages.
