Data is here:
Recap (summary of a Reuters report):
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Consumer Price Index:
- China’s CPI rose by 0.2% in 2024, matching the previous year’s growth and falling well below the 3% target.
- December CPI increased by 0.1% year-on-year, slowing from 0.2% in November and marking the weakest pace since April.
- Core inflation, excluding food and fuel, edged up to 0.4% in December, the highest in five months.
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Producer Price Index:
- Factory-gate prices declined for the 27th consecutive month, with the PPI falling 2.3% in December year-on-year, an improvement from November’s 2.5% decline.
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Economic Challenges:
- Persistent weak domestic demand is driven by:
- Job insecurity.
- A prolonged housing market downturn.
- High debt levels.
- Uncertainty over U.S. trade policies under President-elect Donald Trump.
- Discounting is widespread across retail sectors, including items like bubble tea and luxury goods, while consumers increasingly rent instead of purchasing discretionary items.
- Persistent weak domestic demand is driven by:
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Stimulus Measures:
- Policy stimulus has provided temporary support to demand and prices, but analysts expect its effects to fade, with inflation likely to weaken later in 2025.
- Beijing has ramped up fiscal measures, including:
- A record $411 billion in special treasury bond insurance.
- Plans for substantial funding from ultra-long treasury bonds in 2025.
- $41 billion allocated for equipment upgrades and consumer goods trade-ins, including vehicles.
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Analyst Outlook:
- Economists point to persistent deflationary pressures, with inflation recovery tied to the effectiveness of fiscal policies.
- The property sector downturn continues to drag on consumer confidence.
- While the World Bank has upgraded China’s growth forecast for 2024–2025, subdued household and business sentiment remains a concern.
CPI:
This article was written by Eamonn Sheridan at www.forexlive.com.
