The consumer price index (CPI), the main indicator of inflation in China, registered a year-on-year drop of 0.3% in July this Wednesday, in a phenomenon known as deflation, according to official data released this Wednesday.
Deflation is a fall in prices over time, rather than an increase (inflation). The phenomenon reflects the weakness of domestic consumption and investment and is particularly serious, since a fall in the price of assets, normally contracted through credit, generates an imbalance between the value of loans and bank guarantees.
Analysts pointed to a fall of 0.4% compared to the prices registered a year ago.
Consumer prices, which last fell into negative territory in February 2021, had been on the brink of deflation for months, indicating that a recovery in spending failed to materialize after authorities abolished the coronavirus policy. ‘zero’. year.
Dong Lijuan, a statistician with the National Bureau of Statistics of China, said that the CPI decline is a passing matter: “With the recovery of the Chinese economy, the sustained expansion of market demand, the continuous improvement in the relationship between supply and demand and the phasing out of the effects of the last benchmark high of the year, the CPI is expected to recover gradually.”
The monthly comparison of consumer prices, which had been in negative territory for five consecutive months, accelerated in July to 0.2%, surprising analysts, who expected a further drop, this time of 0.1%.
The specialist indicated that underlying inflation – an indicator that eliminates the volatility of food or energy prices – rose 0.8%, in the annual comparison, the highest value since January, and that the prices of services reached the maximum of the last 17 months, upwards. 1.2%
After China’s CPI rose 2% last year, Beijing set a growth target of around 3% for 2023.
“We are skeptical that China is entering a prolonged period of deflation,” Evans-Pritchard, an analyst at consultancy Capital Economics, said in a report.
The producer price index (PPI), which measures factory prices, fell 4.4% in July, one percentage point less than the previous month. Analysts had forecast a drop of about 4.1%.
Capital Economics attributed the evolution of the PPI to the volatility of the prices of raw materials, this time due to the increase in the cost of oil and gas.
Source: TSF
