• Core inflation and services inflation were both steady at 0.6% YoY and 1.0% YoY respectively

• PPI highlight stubborn deflationary pressure

• Exports and imports growth picks up pace

• China’s loan growth falls as demand struggles

• More policy support seen as economy still fragile

CPI fell for a third straight month in December

China’s consumer prices dropped for a third straight month in December, casting the spotlight again on the weak demand.

Consumer Price Index (CPI) entered into deflation for the third consecutive month as it slipped 0.3% YoY (Nov: -0.5%; Oct: -0.2%), the longest streak of declines since October 2009. Food prices declining the least since September (Dec: -3.7%; Nov: -4.2%) as it clocked its sixth straight month of decline. Meanwhile, non-food inflation edged higher (Dec: 0.5% YoY; Nov: 0.4%). On monthly basis the CPI inched up by 0.1%, pointing to the first rise in three months, contributed by the rebound in food prices (+0.9% MoM) while non-food prices remained negative (-0.1% MoM). For the whole of 2023, the consumer price index rose 0.2%, compared with an official target for about a 3% increase. The world’s second-biggest economy has been battling deflation, in part due to factors including an ongoing property slump, low consumer confidence and weak exports.

Core inflation, which strips out volatile food and energy prices, was steady at 0.6% YoY in December (Nov: 0.6%; Oct: 0.6%). Services inflation, was also steady at 1.0% YoY (Nov: 1.0%; Oct: 1.2%). with tourism and hotel accommodation prices increasing by 6.8% and 5.5%, respectively. For the full year in 2023, core CPI inflation averaged 0.7% (2022: 0.9%).

China’s National Bureau of Statistics (NBS) attributed the narrowing decline in consumer prices to the cold wave and stronger consumer demand ahead of the New Year holiday.

Source: BIMB Securities Research - 15 Jan 2024