China's national consumer price index (CPI) experienced a significant downturn in February, sinking into negative territory for the first time since January of the previous year. The CPI fell by 0.2% on a monthly basis, contrasting with a 0.7% rise observed in January. This unexpected decline, reported by China's National Bureau of Statistics on Sunday, surpassed predictions by economists in a Reuters poll, who had anticipated an annualized contraction of 0.5%.
The year-on-year figures painted a bleaker picture, with the CPI decreasing by 0.7% in February compared to a gain of 0.5% in January. The drop was influenced primarily by lower prices for food, tobacco, and alcohol. The decline comes as Beijing grapples with its ambitious agenda to stabilize economic growth, setting its GDP target for 2025 at around 5%. However, achieving this target may prove challenging due to ongoing issues with domestic consumption and an escalating trade dispute with the United States.
Beijing has adjusted its annual consumer price inflation target to around 2%, marking the lowest goal set in more than two decades, down from previous targets of 3% or higher. This revision is part of broader efforts to encourage economic recovery through increased domestic demand. Yet, the nation's GDP growth rate continues to slow, adding pressure to China's economic landscape.
Investors remain vigilant for signs that Beijing's stimulus measures can bolster the country's economic recovery. Nonetheless, persistent weak domestic consumption and tensions with the U.S. under President Donald Trump's administration are complicating China's path to meeting its growth objectives.