China's Consumer Inflation Slows in December

BEIJING - In December, China's consumer inflation experienced a slowdown, reflecting modest price growth for the upcoming year. This decline occurs alongside a continuing trend of factory-gate deflation, marking its second consecutive year, amidst weakening economic demand.

Several factors have impacted consumer demand, such as job insecurity, an ongoing downturn in the housing market, high debt levels, and potential tariff threats related to the incoming U.S. administration under President-elect Donald Trump. In response, the Chinese government is implementing various stimulus measures aimed at rejuvenating the consumer sector.

According to the National Bureau of Statistics, the consumer price index (CPI) in December increased by only 0.1% year-on-year, a decrease from November's 0.2% rise, representing the slowest growth rate since April. This figure aligns with predictions made in a Reuters poll of economists.

On a month-on-month basis, the CPI remained unchanged in December, recovering from a 0.6% decline in November, which also met expectations.

Core inflation, which excludes the more volatile food and fuel prices, rose by 0.4% last month, up from 0.3% in November, marking the most substantial increase in five months.

Throughout the entire year, the CPI recorded a modest increase of 0.2%, consistent with last year’s rate, and below the official target of approximately 3%. This shortfall indicates that inflation has failed to meet annual goals for the 13th consecutive year.

In addition to these trends, the ongoing price competition in the electric vehicle market has entered its third year, and discounts are becoming more widespread across various retail sectors, including bubble tea shops. Many consumers are now opting to rent items like cameras and handbags instead of purchasing them outright.

Looking at producer prices, the producer price index (PPI) fell by 2.3% year-on-year in December, a slight improvement over the 2.5% drop in November and in line with expectations for a 2.4% decrease. Factory-gate prices have continuously fallen for 27 months.

Towards the end of December, the World Bank revised its growth outlook for China's economy for 2024 and 2025. However, it cautioned that sluggish household and business confidence, coupled with ongoing challenges in the property sector, would continue to hinder recovery.

In an effort to stimulate the economy further, China has committed to a historic $411 billion in special treasury bond insurance measures. The government is planning to significantly increase funding through ultra-long treasury bonds in 2025, aimed at encouraging business investments and consumer initiatives. Last July, authorities allocated $41 billion from government bonds specifically for upgrading equipment and facilitating trade-ins of consumer products such as vehicles.

inflation, economy, China