China deflation extends into a third straight month in December

BEIJING, China — Deflation in China continued for the third month in a row in December, according to official figures released on Friday, bucking the trend in other major inflation-hit economies.

The consumer price index (CPI) fell 0.3% on-year last month, according to the National Bureau of Statistics (NBS).

China slipped into deflation in July for the first time since 2021 and following a brief rebound the following month, prices have been in constant decline since September.

Analysts surveyed by Bloomberg expected a drop of 0.4% last month, having sunk 0.5% in November.

While deflation suggests goods were cheaper, it poses a threat to the broader economy as consumers tend to postpone purchases, hoping for further reductions.

A lack of demand can then force companies to cut production, freeze hiring or lay off workers, while potentially also having to discount existing stocks -- dampening profitability even as costs remain the same.

By way of comparison, inflation in the United States stood at 3.4% in December.

Inflation in China for the whole of 2023 rose by an average of 0.2%, in contrast to other major economies, which saw prices soar once again.

The NBS also said producer prices sank 2.7%, marking the 15th consecutive month of declines.

The PPI index, which measures the cost of goods leaving factories and provides an insight into the health of the economy, fell 3% in November.