China’s inflation falls by the fastest pace in almost 15 years in January

China’s inflation fell 0.8% in January from a year earlier, compared to 0.3% drop previous month and more than expected 0.5% decline.

January’s figure showed that annualized consumer prices were in a steepest decline since 2009, while monthly inflation ticked up by 0.3% last month after 0.1% increase previous month.

So called core inflation, which excludes volatile food and energy prices, rose 0.4% from a year earlier, but down from a 0.6% gain in December.

China’s producer prices fell 2.5% in January, slightly better than December’s 2.7% drop and -2.6% consensus, adding to negative signals of deflationary risk and warnings to policymakers to put more efforts to revive economic growth.

Chinese economy has been fighting with slowing prices since early 2023, which prompted the central bank to cut interest rates to boost growth, while other developed economies were fighting with stubbornly high inflation and raised their interest rates sharply.

Economists warn that authorities need to take more aggressive action, to avoid risk of deepening crisis, as the economy faces persistent deflationary pressure and recovery from 2022 Covid restrictions still lacks momentum.

Deepening property crisis, local government debt risks and weaker performance of manufacturing sector on soft global demand, contribute to cloudy outlook.

Although Chinese economy grew in line with expectations in 2023, recovery was shakier than anticipated, signaling that authorities need to keep this year’s growth at a target similar to last year, to minimize risks.

China’s central bank already acted by the deepest cut to bank reserves in two years, to support the economy, but more work will be required to lift confidence and demand.