BEIJING: China's consumer prices contracted last month for the first time in more than two years, official data showed Wednesday, as slowing domestic spending weighs on the country's post-Covid economic recovery.
The Consumer Price Index, the main gauge of inflation, fell 0.3 in July, the National Bureau of Statistics said, having flatlined in June.
Analysts polled by Bloomberg had anticipated a 0.4 percent decline. The figures come a day after news that the country's exports last month fell at their fastest pace in more than three years as global demand for Chinese products wanes. Imports also sank for a ninth straight month owing to weak domestic demand.
While a fall in the price of goods may appear beneficial for purchasing power, deflation poses a threat to the broader economy as consumers tend to postpone purchases in the hopes of further reductions.
A lack of demand then forces companies to reduce production, freeze hiring or lay off workers, and agree to new discounts to sell off their stocks -- weighing on profitability even as costs remain the same.
China experienced a short period of deflation at the end of 2020 and early 2021, largely because of a collapse in the price of pork, the most widely consumed meat in the country.
By RSS/AFP
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