China’s consumer prices fall at fastest pace in 3 years

China’s consumer prices fell at the fastest pace in 3 years, while producer costs fell further into negative territory, underscoring the challenges facing economic recovery.

China’s national statistics bureau said in a statement that the consumer price index fell by 0.5% last month from a year earlier. This is the biggest decline since November 2020.

Producer prices decreased by 3%, compared with projections of a 2.8% decline. Costs at factories remained overwhelmed in the contraction zone for 14 consecutive months.

China has suffered price falls for most of this year, in contrast to many other parts of the world, where central banks focus on taming inflation instead.

The downturn poses a threat to China because it can lead to a downward spiral in economic activity. Consumers may halt purchases due to expectations that prices will continue to fall, putting pressure on overall consumption. Companies may reduce production and investment due to uncertain future demand.