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China's inflation increases slightly in August, concerns about slow spending remain
(MENAFN) China's inflation saw a modest increase in August, reaching its highest level in six months, according to official data. However, the rise fell short of market expectations and did little to alleviate concerns over sluggish consumer spending in the world's second-largest economy. The consumer price index (CPI), which serves as a key measure of inflation, grew by 0.6 percent year-on-year in August, a slight uptick from the 0.5 percent reported in July, as noted by the National Bureau of Statistics. This figure, although the highest since February, was below the 0.7 percent forecasted in a survey. According to Gabriel Ng, associate chief economist at Capital Economics, the increase in inflation was limited by lower energy prices, despite a weather-driven rise in vegetable prices. While Western economies grapple with high inflation, China's challenge lies in averting another decline.
China's economic policy efforts continue to focus on boosting domestic consumption amid waning consumer confidence, exacerbated by ongoing property market issues and trade tensions. Earlier this year, China experienced a significant downturn in inflation, with the sharpest contraction in 14 years recorded in January. The country also endured a four-month recession by the end of 2023. Zhang Qiu, chief economist at Pinpoint Asset Management, emphasized that deflation remains a critical threat to China's economic stability. He argued that a more proactive fiscal policy is needed to prevent deflationary expectations from becoming entrenched in the economy. Meanwhile, producer prices, which reflect inflation at the factory level, declined by 1.8 percent year-on-year, extending a deflationary trend that has persisted since late 2022.
In response to these challenges, Chinese authorities have increased support measures for the private sector to stimulate economic activity and encourage household consumption. However, they have refrained from deploying the kind of large-scale stimulus packages seen during the global financial crisis, despite growing calls for more aggressive action. The government's cautious approach suggests a preference for targeted interventions rather than broad-based spending, as it navigates the delicate balance between supporting growth and maintaining financial stability.
China's economic policy efforts continue to focus on boosting domestic consumption amid waning consumer confidence, exacerbated by ongoing property market issues and trade tensions. Earlier this year, China experienced a significant downturn in inflation, with the sharpest contraction in 14 years recorded in January. The country also endured a four-month recession by the end of 2023. Zhang Qiu, chief economist at Pinpoint Asset Management, emphasized that deflation remains a critical threat to China's economic stability. He argued that a more proactive fiscal policy is needed to prevent deflationary expectations from becoming entrenched in the economy. Meanwhile, producer prices, which reflect inflation at the factory level, declined by 1.8 percent year-on-year, extending a deflationary trend that has persisted since late 2022.
In response to these challenges, Chinese authorities have increased support measures for the private sector to stimulate economic activity and encourage household consumption. However, they have refrained from deploying the kind of large-scale stimulus packages seen during the global financial crisis, despite growing calls for more aggressive action. The government's cautious approach suggests a preference for targeted interventions rather than broad-based spending, as it navigates the delicate balance between supporting growth and maintaining financial stability.
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