China’s consumer prices remained flat in September, according to figures released recently. The numbers again show weak consumer demand as the world’s second-largest economy continues to stumble out of the COVID pandemic. The Consumer Price Index (CPI) came in below the 0.2 per cent increase that analysts expected. 

Consumer prices fell in July for the first time since 2021, sparking concerns that China was headed for deflation. A slight 0.1 per cent increase in August briefly alleviated those fears, yet September’s disappointing data shows that the country’s economy has yet to fully restore consumer confidence. 

“CPI inflation at zero indicates the deflationary pressure in China is still a real risk to the economy. The recovery of domestic demand is not strong, without a significant boost from fiscal support,” Zhiwei Zhang, the chief economist of Pinpoint Asset Management, has told the Reuters. 

China’s deflation difficulties are in stark contrast to the rest of the world’s inflation crisis over the last two years. Falling prices can lead to a cycle where consumer spending drops, followed by sinking profits, lower employment and dropping investment. 

Some recovery in China is under way. Factory activity expanded in September and domestic travel over the recently-concluded Golden Week national holiday recovered to just above pre-COVID 2019 levels though still lower than government forecasts.