CHINA’S consumer prices fell last month at the fastest pace since the global financial crisis, piling pressure on the government to support a stumbling economic rebound that’s roiling markets. The consumer price index dropped 0.8 per cent in January from a year ago, the National Bureau of Statistics said on Thursday (Feb 8), the weakest since September 2009. The drop was worse than economists’ expectations for a 0.5 per cent decline. The producer price index fell 2.5 per cent, compared with projections for a 2.6 per cent decrease. Factory-gate costs have been stuck in deflation for 16 straight months. The latest data may add to calls for China to do more to stimulate the economy and reverse a stock market slide. Confidence in the world’s second-largest economy has been flagged despite efforts by the government to add stimulus, including measures such as unleashing long-term cash for banks and issuing more government bonds to fund construction projects. China has also taken a slew of moves to arrest the US$5 trillion equities sell-off. President Xi Jinping was set to get a briefing from regulators on the rout, Bloomberg News reported earlier this week. Then late Wednesday, China replaced the head of the main securities regulator, sending shockwaves across the industry. “The CPI data today shows China faces persistent deflationary pressure,” said Zhiwei Zhang, president and chief economist at Pinpoint Asset Management. “China needs to take actions quickly and aggressively to avoid the risk of deflationary expectation to be entrenched among consumers.” The benchmark CSI 300 Index rose 0.4 per cent on Thursday, in line for a fourth day of gains. The yuan was little changed at 7.1945 per US dollar. China has been beset by falling prices for much of the last year as the nation struggles to revive domestic demand and consumer confidence. A measures of economy-wide prices marked its longest slide since 1999 in the fourth quarter, underscoring the magnitude of the challenge as policymakers look to boost growth this year. Core CPI, which strips out volatile food and energy costs, rose 0.4 per cent, slower than December and the weakest rise since June last year. Pork prices dropped 17 per cent, helping drag down food prices by 5.9 per cent, which was the biggest decline on record in data back to 1994. The risks from deflation are serious. If China is unable to meaningfully turn the trend around, it risks leading to a downward spiral with people holding off on purchases due to expectations prices would continue falling. That would dent overall consumption and spill over to businesses. Economists see deflation pressure in China continuing for at least another six months, largely because of the real estate turmoil. While China was able to reach an official growth goal of “around 5 per cent” in 2023, repeating a similar performance this year may be difficult without bigger efforts by policymakers. “The prolonged property woes and stock market volatility hurt household sentiment,” said Raymond Yeung, chief economist for Greater China at Australia & New Zealand Banking Group. “Deflationary pressure remains strong,” driven by a lack of demand leading to overcapacity, he said. There is an “imminent need” to cut rates, and the weak inflation data can offer a good excuse to do so, Yeung added. BLOOMBERG