Chinese consumer prices slip back into decline amid deflationary pressures

China’s consumer prices slipped back into decline in August, highlighting persistent deflationary pressures, while a narrower drop in factory-gate prices suggested Beijing’s “anti-involution” campaign may be starting to take hold.

The national consumer price index (CPI), a key gauge of inflation, fell 0.4 per cent year on year last month, according to data released by the National Bureau of Statistics on Wednesday.

The reading fell short of market expectations after a poll by financial provider Wind forecast a 0.2 per cent drop. In July, the CPI remained unchanged from the same month last year.

China is struggling with entrenched deflationary pressures, as weak domestic demand and industrial oversupply weigh on prices while trade uncertainty hampers suppliers’ efforts to clear their stock.

China’s producer price index, which tracks prices at the factory gate, fell by 2.9 per cent year on year last month, marking the 35th consecutive month of contraction.

The reading was roughly in line with the 2.88 per cent drop projected in the Wind poll.