Drop in China CPI Fuels Deflation Concerns
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China’s consumer price index (CPI) fell last month for the first time in over a year, reigniting concerns about deflationary pressures in the world’s second-largest economy.
The consumer inflation gauge was down 0.7% year-on-year, the first decline and the lowest level since January 2024, according to figures released Sunday by the National Bureau of Statistics (NBS).
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- China's CPI decreased 0.7% year-on-year, the first decline in over a year, raising deflation concerns.
- February's CPI drop, partly due to Lunar New Year timing, saw core CPI fall 0.1% and PPI decrease 2.2%.
- Analysts predict CPI rebound to near zero in March but caution deflation persists despite a 2% CPI growth target for the year.
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Who’s Who
- Capital Economics Ltd.
- Capital Economics Ltd. is a firm whose China economist, Zichun Huang, noted in a report that renewed deflationary pressures were evident in China's economy, highlighting food price deflation as a main factor. The firm's analysis indicated that the consumer price index for the first two months of the year fell 0.1% year-on-year, despite a stock rally and high box-office sales driven by the success of the film "Ne Zha 2."
- Nomura
- Nomura analysts noted that despite the stock rally from DeepSeek's emergence and the success of the animated film "Ne Zha 2," demand was weak, contributing to deflationary pressures reflected in the first two months' CPI decline. They also observed that February's producer price index (PPI) drop was driven by weak domestic construction demand and falling global oil prices, forecasting a further PPI decline in March.
- China Minsheng Banking Corp. Ltd.
- China Minsheng Banking Corp. Ltd. analysts suggest that increased fiscal stimulus could alleviate deflationary pressure in China by boosting consumer confidence and household spending, which would raise the core CPI. They anticipate more fiscal subsidies to achieve this and support the economy.
- Guosheng Securities Co. Ltd.
- Guosheng Securities Co. Ltd. analyzed the recent CPI and PPI figures in China and highlighted the need for the country's central bank to lower interest rates and the banks' reserve requirement ratio to support the economy amid deflationary pressures.
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What Happened When
- January 2025：
- Consumer inflation rose to a five-month high due to Lunar New Year holiday shopping demand.
- February 2025：
- The consumer price index (CPI) and core CPI both declined year-on-year, attributed to the timing of the Lunar New Year.
- February 2025：
- The producer price index (PPI) fell 2.2% year-on-year, continuing its monthly decline since October 2022.
- March 9, 2025：
- The National Bureau of Statistics (NBS) released figures showing a 0.7% year-on-year decline in CPI for February 2025.
- March 9, 2025：
- Nomura analysts noted that the first two months' CPI suggested weak demand despite a stock rally and box-office boom.
- March 10, 2025：
- Capital Economics Ltd.'s China economist Zichun Huang commented on the renewed deflationary pressures observed in the first two months of 2025.
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