China: As economy slumps, deflation pressure worsens, survey shows

According to China Beige Book International, deflationary pressure in China exacerbated in the fourth quarter as the economy contracted, and price rise is likely to be muted even when the economy recovers later this year. 

According to a report released by CBBI on Tuesday, businesses saw their wages and input costs grow at the slowest rate since mid-2020 in the final three months of 2022. According to the report, growth in sale prices has dropped to its lowest point since late 2020. 

The study’s foundation is a survey of 4,354 enterprises that was carried out by CBBI, a source of impartial economic data, during the relevant time.

Sales price increase has slowed to a crawl, indicating that short-term disinflation is already underway, it claimed. The Covid hit to retail might cause deflation in the first quarter, according to the statement. 

Due to Covid interruptions, consumer inflation decreased from 2.1% in October to 1.6% in November, according to government figures. Despite a pick-up in economic development, economists surveyed by Bloomberg anticipate that full-year inflation will stay relatively low at 2.3% this year. 

After the first quarter, inflation is projected to resume, but it “will essentially represent the making up of lost ground before waning,” according to CBBI’s analysis.  Given that China continues to experience long-term deflationary pressures due to demographic difficulties, any sustained and significant price hikes will necessitate protracted policy easing, it was stated.

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