China’s consumer prices sank further into deflationary territory in January, suffering their biggest drop since the 2009 global financial crisis, according to the National Statistics Office (BNE). The Consumer Price Index (CPI) fell 0.8% compared to the previous year, marking the fourth consecutive month of decline.
The sharp drop was largely attributed to a seasonal issue, with last year’s high comparison base and weak consumer demand affecting prices. The Lunar New Year falling in February this year, compared to late January last year, also caused distortions in the basis, according to economists at HSBC.
Food prices, particularly pork and vegetables, were major drags on the index, with pork prices plummeting 17.3% from a year earlier and vegetable prices falling almost 12%.
Despite the decline, analysts believe the slowdown may have bottomed out, with the CPI increasing 0.3% in January compared to December. Lynn Song, chief Greater China economist at ING Economics, believes consumer prices are likely to rise from February, taking into account the more favorable base effects for the February data.
The drag on pork prices is expected to fade in the coming months, as holiday demand could push up meat prices, with China set to celebrate the Lunar New Year starting Saturday.
The report is a developing story and will be updated as more information becomes available.