China’s consumer prices returned to positive territory in August while factory-gate price declines slowed, data showed on Saturday (Sep 9), as deflationary pressures eased amid signs of stabilisation in the economy.

The consumer price index (CPI) rose 0.1 per cent in August from a year earlier, the National Bureau of Statistics said, slower than the median estimate for a 0.2 per cent increase in a Reuters poll. CPI fell 0.3 per cent year on year in July.

The producer price index (PPI) fell 3.0 per cent from a year earlier – in line with expectations – after a drop of 4.4 per cent in July.

“There is a bit of improvement in the inflation profile. In the meantime, the PPI deflation appears to be narrowing, pointing to a slow and moderate restoring process,” said Zhou Hao, chief economist at Guotai Junan International.

“In general the inflation (rate) still points to weak demand and requires more policy support for the foreseeable future.”

China in July became the first of the Group of 20 wealthy nations to report a year-on-year decline in consumer prices since Japan’s last negative headline CPI reading in August 2021.

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August trade data showed China’s exports and imports both narrowing their declines, joining a run of other indicators showing a possible stabilisation in the economic downturn, as policymakers seek to spur demand and fend off deflation.

“With early signs of growth stabilisation, we see deflationary pressures easing, a trend reflected in higher commodity prices in August,” ANZ analysts said in a note.

Beijing has announced a series of measures in recent months to shore up growth, including mortgage rate cuts and the easing of borrowing rules last week by the authorities to aid homebuyers.

But analysts believe more policy steps are needed to shore up consumer confidence, with a labour market recovery slowing and household income expectations uncertain.

Premier Li Qiang said this week that China is expected to achieve its 2023 growth target of around 5 per cent, but some analysts believe the target could be missed due to a worsening property slump, weak consumer spending and tumbling credit growth. REUTERS