China's consumer prices fall for first time in 2 years

China's CPI dropped 0.3% in July, PPI fell 4.4%. Deflationary pressures mount as economic recovery slows due to weak demand, property downturn, and high youth unemployment. Authorities have downplayed deflation risk, setting a 3% inflation target for 2021. Investors await policy stimulus to boost economy.

China's consumer prices dropped in July for the first time since February 2021, while factory gate prices continued their declines, data showed on August 9, as lacklustre demand weighed on the economy.

The consumer price index (CPI) for the month dropped 0.3% year-on-year, the National Bureau of Statistics (NBS) said, a slightly slower fall than the median estimate for a 0.4% decrease in a Reuters poll. CPI was unchanged in June.

The producer price index (PPI) fell for a 10th consecutive month, down 4.4% from a year earlier after a 5.4% drop the previous month. That compared with a forecast for a 4.1% fall.

China's economic recovery slowed after a brisk start in the first quarter, as demand at home and abroad weakened. Authorities have rolled out a flurry of policy measures to support the economy, with more steps expected.

The drop in consumer prices is more cause for concern with mounting deflation pressures amid faltering economic growth due to persistent property downturn and falls in imports and exports.

However, authorities have downplayed concerns about deflation. Liu Guoqiang, deputy governor of the central bank, last month said there would be no deflationary risks in China in the second half of the year, but noted the economy needs time to return to normal after the pandemic.

The government has set a consumer inflation target of around 3% this year, which be up from 2% recorded in 2022.