China’s consumer inflation slows further in December, stoking deflation fears

China consumer prices in December rose 0.1% year-on-year, in line with expectationsNational Statistics Office data showed on Thursday, but the slower rise from the previous month stoked concerns about deflation.

Analysts polled by Reuters expected the consumer price index to fall to 0.1% in December from 0.2% in November on a year-on-year basis.

China’s producer price inflation fell 2.3% year-on-year in December, declining for the 27th month. The reading is slightly better than Reuters estimates of a 2.4% drop.

The current near-zero consumer inflation indicates that China continues to struggle with weak domestic demand that has raised the specter of deflation.

Consumption has failed to recover despite a series of stimulus measures introduced by Beijing since then. last septemberwhich included interest rate reductions, support for the stock and real estate markets, and increased bank lending.

As recently as Wednesday, China expanded its consumer sharing plan aimed at stimulating consumption through equipment upgrades and subsidies.

However, certain metrics indicate that China’s economy could see some recovery. the country Manufacturing activity has been expanding. during the last three months, although the pace of expansion slowed in December.

“Although China’s economy showed some signs of recovery following the policy change in September, it continues to face significant challenges,” said Carlos Casanova, senior economist at private bank Union Bancaire Privée, citing headwinds in the country’s real estate sector and trade tensions with the United States.

Louise Loo, chief economist at Oxford Economics, expects China’s path to reflation will still disappoint by most estimates, given persistent weakness in consumer spending appetite.

China land yuan It hit a 16-month low of 7.3316 against the dollar on Wednesday as Treasury yields rose and the dollar strengthened.