In February, China’s consumer prices increased for the first time in six months

According to statistics released on Saturday, consumer prices in China increased in February for the first time since August, defying a period of deflation that had worsened the nation’s many economic problems.

The second-largest economy in the world is struggling with a protracted housing sector crisis and rising young unemployment. Last year, it had some of its worst growth in decades.

However, there was one unusual bright spot: according to Beijing’s National Bureau of Statistics (NBS), official data released on Saturday revealed that the consumer price index increased by 0.7 percent last month, marking the first gain since August.

The result exceeded the 0.3 percent gain that Bloomberg’s panel of experts had predicted and was a significant improvement over the 0.8 decline that was seen in January—the worst decline in almost 14 years.

The encouraging news comes at a time when top officials convene in Beijing for the annual “Two Sessions” of China’s parliament and highest political advisory body, where the topics of national security and the economy have taken center stage.

Premier Li Qiang said on Tuesday that the nation will aim for five percent growth in 2024. This is an ambitious target, which he recognized would “not be easy” to achieve given the economic challenges the country faces.

Deflation, which China experienced for the first time since 2021 in July, has been foremost among those problems.

Prior to last month, prices had not increased except for a tiny uptick in August.

The Chinese New Year season, also known as the Spring Festival, which happened in February this year, often results in an increase in consumer prices.

“The prices that increased more were mainly those of food and services,” NBS statistician Dong Lijuan said in a release.

“During the Spring Festival period, consumer demand for food products grew, in addition to rainy and snowy weather in some regions affecting supply,” Dong said.

Demand is still low.
China’s declining prices stand in sharp contrast to the rest of the globe, where central banks are being forced to raise interest rates due to persistent inflation.

Deflation implies that items were less expensive, but it also threatens the whole economy since buyers prefer to put off purchases in the hopes of additional price reductions.

while demand is low, businesses may be forced to reduce output, halt recruiting, or fire employees. They may also need to mark down their current inventory, which may reduce profitability even while expenses stay the same.

One expert advised against seeing Saturday’s numbers as indicating China was no longer experiencing deflation due to the vacation effect.

Pinpoint Asset Management’s president and chief economist, Zhiwei Zhang, said, “I think it is too early to conclude that deflation in China is over.”

“The domestic market is still not very strong. New apartment property sales have not yet stabilized, he said.

Additionally, the NBS reported that producer prices fell by 2.7% in February.

“Affected by the Spring Festival holiday and other factors, industrial production was in its traditional off season,” Dong said.

Investors have demanded that Beijing take much more decisive steps to support the faltering economy.

Beijing set a goal for the budget deficit to GDP of 3% this year, indicating that it was unlikely to turn to large-scale bailouts, even in spite of requests for more extensive stimulus measures.