China's Consumer Prices Slump for Second Consecutive Month: Data Shows

Official statistics revealed on Thursday that consumer prices in China dropped for the second consecutive month in March. This decline comes as the global economy’s second largest faces challenges in stimulating consumption, compounded by an intensifying trade dispute with the United States.

This decline occurs as Beijing aims to increase domestic spending, which hasn’t yet returned to its prepandemic state.

According to statistics published by the National Bureau of Statistics (NBS), the Consumer Price Index (CPI), which serves as an important indicator of inflation, decreased by 0.1 percent on a yearly basis in March.

The number was marginally below what analysts tracked by Bloomberg anticipated; they had forecasted the index to stay steady.

However, the decrease in the index shrank from the 0.7 percent reduction compared to last year in February.

Over the last two months, we've seen a reversal of the 0.5 percent increase observed in January. This rise was driven by an upsurge in spending during the Lunar New Year, which pushed inflation to its peak for several months.

In March, the costs of food, tobacco, and alcohol decreased by 0.6 percent compared to the previous year.

Although deflation indicates that the price of products is decreasing, it can be detrimental to the overall economy since customers often delay their buying decisions expecting even lower prices in the future.

When there’s insufficient demand, businesses might be compelled to reduce output, halt recruitment, or dismiss employees, along with possibly needing to offer discounts on their current inventory — which could diminish profit margins despite unchanged expenses.

Last year, Beijing introduced numerous initiatives to stimulate the economy, such as reducing interest rates and eliminating home-buying limitations.

China's precarious economic rebound faces threats from a trade conflict initiated by U.S. President Donald Trump, who escalated tariffs against China to as high as 125% on Wednesday.

"As noted by Zhiwei Zhang, president and chief economist of Pinpoint Asset Management, deflationary pressures continue," he stated in a memo.

He noted that the level of uncertainty regarding policies in the U.S. remains high.

In March, Premier Li Qiang set a national growth target of "approximately five percent" for this year, which remains unchanged from 2024.

Numerous economists view this objective as challenging due to the obstacles confronting China's economy.