People visit the US luxury brand Coach store at a shopping mall in Beijing.
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China’s consumer prices fell more than expected in August while deflation in wholesale prices persisted, as calls mounted for Beijing to ramp up measures to bolster sluggish domestic demand and cushion weakening exports growth.
The consumer price index dipped 0.4% last month from a year earlier, according to data from the National Bureau of Statistics released Wednesday, compared with Reuters-polled economists’ forecast for a 0.2% contraction.
Core CPI, which strips out volatile food and energy prices, rose 0.9% from a year earlier, the highest since February 2024, according to Wind Information. Household appliances and the clothing categories saw notable price gains of 4.6% and 1.9%, respectively.
The producer price index dropped 2.9% in August from a year ago, in line with economists’ estimates and has stayed flat on a month-on-month basis.
Chinese authorities said that headline CPI had slipped into negative territory largely due to the high-base last year and lower food prices, while crediting the narrower decline in producer prices in part to Beijing’s efforts in regulating the excessive price competition.
The drop in food prices deepened to 4.3% in August compared to 2.7% in July, with pork, fresh vegetable and fruit prices experiencing wider declines.
Deflation in consumer durables, which could serve as a better guide to gauge the broader price pressures, deepened to 3.7% last month, from 3.5% in July, according to the estimates by Zichun Huang, China economist at Capital Economics.
While underlying inflation has ticked up, the data mostly reflected “temporary factors rather than any meaningful improvement in underlying supply-demand imbalances,” added Huang.
The deflation in PPI, now in its third year, has eased modestly compared to the prior months, but a “continued upcycle is still some way off for China,” said Tianchen Xu, senior economist at Economist Intelligence Unit, citing Beijing’s reluctance to impose restrictions on industrial capacity and softening global demand for raw material and industrial goods.
In terms of the recovery in core CPI, “it seems that demand stimulus played a role in propping up prices, even if it’s still far from China’s own inflation target,” Xu added. China has set its annual inflation target at around 2% for 2025.
Services inflation edged up to 0.6% year on year.
Chinese policymakers have intensified efforts aimed at reining in excessive price cuts that have eroded corporate profits while doing little to spur demand.
A slew of local governments across the country have paused their consumer trade-in programs — that subsidize spending on cars, household appliances and smartphones — due to the rapid depletion of the allocated funds.
Economists have ramped up calls for Beijing to unleash fiscal support as fresh data signals mounting economic strains.
The country’s exports growth slowed to 4.4% in August, slowest in six months, China’s customs data showed Monday, with economists expecting outbound shipments to come under pressure as the U.S. targets rerouting of goods via third countries.
— CNBC’s Evelyn Cheng contributed to this report.
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