SHANGHAI: China’s factory deflation eased more than expected in January, as downward pressure on prices moderates thanks to higher commodity costs and government efforts to rein in excessive competition among companies.
Producer prices fell 1.4% last month from a year earlier, their smallest decline since July 2024, according to data released by the National Bureau of Statistics yesterday.
The consumer price index rose just 0.2% in January from a year earlier after a 0.8% rise in December – a slowdown caused largely by base effects.
The median forecast of economists surveyed by Bloomberg was for a 0.4% uptick.
China’s economy remains in the grip of deflation that’s eating away at income and profits.
The country’s gross domestic product deflator declined for the third straight year in 2025, the longest streak since China transitioned towards a market economy in the late 1970s.
The statistical effect of a high base last year probably contributed to January’s slower rate of consumer inflation because of the timing of the Lunar New Year, which tends to drive up spending by households.
The festival is a moving holiday that ran from Jan 28 to Feb 4, 2025, but will fall entirely in February of this year.
Bloomberg Economics expects China’s economy to start to reflate as soon as in mid-2026, thanks to subsidies to spur consumption and policies to curb involution-style competition.
Bloomberg economists Eric Zhu and David Qu said: “Going forward, a more sustainable recovery in prices will require longer-term support to revive consumer demand. That won’t be easy with confidence so low.”
Chinese officials have signalled that maintaining a “reasonable recovery in prices” has become a key consideration for monetary policy in 2026, with the central bank suggesting it has room to further reduce interest rates and reserve requirements for lenders. — Bloomberg
