China deflation extends into a third straight month in December

The consumer price index (CPI) fell 0.3 percent on-year last month, according to the National Bureau of Statistics (NBS).

China slipped into deflation in July for the first time since 2021 and following a brief rebound the following month, prices have been in constant decline since September.

Analysts surveyed by Bloomberg expected a drop of 0.4 percent last month, having sunk 0.5 percent in November.

While deflation suggests goods were cheaper, it poses a threat to the broader economy as consumers tend to postpone purchases, hoping for further reductions.

A lack of demand can then force companies to cut production, freeze hiring or lay off workers, while potentially also having to discount existing stocks -- dampening profitability even as costs remain the same.

By way of comparison, inflation in the United States stood at 3.4 percent in December.

Inflation in China for the whole of 2023 rose by an average of 0.2 percent, in contrast to other major economies, which saw prices soar once again.

The NBS also said producer prices sank 2.7 percent, marking the 15th consecutive month of declines.

The PPI index, which measures the cost of goods leaving factories and provides an insight into the health of the economy, fell three percent in November.