Decreasing inflation in China raises concerns

BEIJING

The ongoing decline in producer prices and stagnation in consumer prices in China have raised concerns about deflation risk.

China's National Bureau of Statistics (NBS) announced that producer prices in the country decreased by 4.4% and consumer prices dropped by 0.3% year-on-year in July.

While the downward trend in producer prices continued for nine months, consumer inflation decreased for the first time since February 2021.

The consumer inflation was stable in June.

The consumer inflation entered a recessionary course by recording increases below 1% level since March.

Food prices decreased by 1.7% in July after a 2.3% increase in June, while non-food inflation, which declined by 0.6% in June, remained stable in July.

The increase in core consumer inflation, which excludes food and energy prices, was 0.4% in June and 0.8% in July.

Analysts said that the government should take measures to strengthen domestic demand against the risk of deflation, defined as a decrease in prices for three consecutive months.

The decline in producer prices showed that the manufacturing sector has not yet recovered from the impact of the pandemic and ongoing unfavorable external conditions.

*Writing by Gokhan Ergocun from Istanbul