China’s consumer prices fall for the first time in 2 years, as fears of deflation grow


Customers at a fresh food market in Shanghai, China, on Monday, Aug. 7, 2023.
Bloomberg | Bloomberg | Getty Images

BEIJING — China reported a 0.3% drop in consumer prices in July from a year ago, and a 4.4% year-on-year drop in producer prices in July, according to the National Bureau of Statistics Wednesday.

China’s consumer price index was expected to drop by 0.4% in July from a year ago, according to analysts polled by Reuters.

The producer price index was forecast to fall by 4.1% in July from a year ago, the poll showed.

Lackluster domestic demand has persisted since the pandemic. China’s consumer price index was flat in June from a year ago. Second-quarter data prompted several economists to warn of growing risk of deflation — a persistent decrease in prices over time.

Officially, China’s central bank has pushed back against such fears and said it expects consumer prices to pick up after a dip in July.

Oxford Economics expects China’s consumer price index to grow by 0.5% this year and the producer price index to rise by 3.5%.

“China’s weak demand follow-through in Q2 can be attributed to its relatively contained demand-side stimulus during Covid, years of regulatory tightening, and an ongoing housing correction,” Louise Loo, lead economist at Oxford Economics, said in a note Tuesday.

It’s a “positive development” that authorities are choosing targeted easing, rather than large-scale stimulus, Loo said.

China reported trade data Tuesday that showed a sharp plunge in both overseas and domestic demand.

Exports fell by 14.5% in July from a year ago, while imports dropped by 12.4% in U.S. dollar terms — both worse than analysts had expected.

The sharp decline in the imports figure was partly due to commodity price declines, but Loo’s estimates indicate imports declined in real volume terms by around 0.4%.

China is set on Aug. 15 to release retail sales, industrial production and other data for July.

This is a breaking news story. Please check back for updates.

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