China’s consumer prices fall more than expected in August as deflation woes persist
People visit the US luxury brand Coach store at a shopping mall in Beijing.
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China’s consumer prices saw a larger than expected decline in August, while deflation in wholesale prices continued, prompting calls for increased measures to boost domestic demand and support weakening exports.
The consumer price index dropped 0.4% year-on-year, surpassing economists’ forecasts of a 0.2% contraction.
Core CPI, excluding food and energy prices, rose 0.9% year-on-year, reaching its highest level since February 2024. Household appliances and clothing categories recorded significant price increases of 4.6% and 1.9%, respectively.
The producer price index fell 2.9% in August compared to the previous year, in line with expectations, and remained unchanged on a month-on-month basis.
Chinese authorities attributed the negative headline CPI to a high base effect from the previous year and lower food prices. They also credited the smaller decline in producer prices to efforts to regulate excessive price competition.
The decline in food prices deepened in August, with pork, fresh vegetables, and fruit experiencing wider drops.
Deflation in consumer durables worsened to 3.7% in August, with the level of deflation more severe than during the 2008 financial crisis.
While underlying inflation showed some improvement, economists believe it is driven by temporary factors rather than a significant shift in supply-demand dynamics.
The persistent deflation in PPI, now in its third year, indicates a slow recovery for China, influenced by global demand and industrial capacity restrictions.
Although core CPI has shown some recovery, it falls short of China’s inflation target of around 2% for 2025.
Services inflation increased to 0.6% year-on-year.
Chinese policymakers are focusing on curbing excessive price cuts to protect corporate profits and stimulate demand.
Several local governments have halted consumer trade-in programs due to fund depletion, while economists urge Beijing to implement fiscal support amid economic challenges.
China’s exports growth slowed to 4.4% in August, the lowest in six months, as the US targets rerouting of goods through other countries.
— Contributed by CNBC’s Evelyn Cheng.
