Thursday, September 21, 2023

China assures that “there is no risk of deflation now or in the future”

China assured today that “no risk of deflation” in the country “neither now nor in the future” after announcing last week that the consumer price index (CPI) entered negative territory by falling 0.3% year-on-year in July.

“There is no risk of deflation in China now or in the future,” said the spokesman for the National Statistics Office (ONE) Fu Linghui, who, however, acknowledged that the country’s economic recovery “faces several challenges.”

The July rate was 0.3 points below that of the previous month, and was the first contraction in the CPI since February 2021.

The ONE statisticians believe that the fall in the CPI is “a temporary matter” and they have expressed that they expect it to gradually rebound with “a sustained expansion of market demand” or “the phasing out of the effects of last year’s high comparative base.”

“Domestic demand has continued to grow. Consumption of services, such as those derived from summer holidays, is already rising, offering significant supportFu said today.

However, the ONE reported today that retail sales, a key indicator to measure the state of consumption, increased by 2.5% year-on-year in July, a lower figure than the 3.1% reached in June and which remains below what was expected by the experts, who advanced that it would increase by 4.6%.

The data of the Industrial production of the country, which grew by 3.7% year-on-year in July, a figure that represents a slowdown compared to the data for June (4.4%).

The official unemployment rate in urban areas stood at 5.3% at the end of July, above the 5.2% registered in June, but still within the maximum limit that the authorities imposed for this year, of 5.5%.

The ONE suspended the publication of the urban youth unemployment rate from this month of August, due to the “economic and social changes that require an improvement and optimization of labor statistics”after a few months in which the indicator set records above 20%.

On the other hand, investment in fixed assets it increased by 3.4% interannual in the first seven months of the year after having done so by 3.8% until June, which translates into a decrease that the ONE preferred to express in intermonthly terms (-0.01%).

“The growth rate of some important indicators slowed down in July, which is a fluctuation normal. Overall, output grew steadily in July, employment held up, and the economy has continued its recovery process,” Fu said today.

After a promising start to the year, the post-pandemic recovery of the Chinese economy shows signs of slowing down, growing less than expected in the second quarter (+6.3% year-on-year).

The low national and international demanddeflation risks and insufficient stimuli, together with a real estate crisis that has not bottomed out and a lack of confidence in the private sector are the main causes that analysts use to explain what is happening in the world’s second largest economy.


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