China Inflation Update: Consumer and Producer Prices Struggle Amid Economic Weakness

China Inflation Update: Detailed Insights

China inflation faced setbacks as consumer prices fell below expectations in August, reflecting persistent economic weakness. According to the National Bureau of Statistics (NBS), the Consumer Price Index (CPI) increased only by 0.6% year-on-year, falling short of the anticipated growth of 0.71% noted by analysts from Wind.

Producer Prices Continue Their Decline

• The Producer Price Index (PPI) saw a decrease of 1.8%, marking the 23rd consecutive month of decline.
• This reading again missed forecasts, which projected a decrease of 1.4%.

Core Inflation Shows Slight Increase

In a slight positive movement, China’s core inflation, excluding volatile food and energy prices, rose by 0.3% year-on-year. On a month-on-month basis, inflation saw a 0.4% increase, consistent with July’s performance.

Government Response to Economic Challenges

Consumer price growth in the world’s second-largest economy has hovered near zero for 16 months, significantly below the government’s annual target of 3%. In response, former People’s Bank of China governor Yi Gang emphasized the importance of active fiscal policies and looser monetary strategies to combat deflationary pressures. His comments came during the Bund Summit in Shanghai.

“We must focus on fighting deflationary pressure,” Yi stated. “The immediate task is to turn the GDP deflator positive in the short term.”