(Bloomberg) — Deflationary pressure in China worsened in the fourth quarter as the economy slumped, with price-growth likely to be subdued even when the economy rebounds later this year, according to China Beige Book International.
Companies recorded the weakest growth in wages and input costs in the final three months of 2022 since mid-2020, CBBI said in a report Tuesday. Growth in sale prices also slowed to the worst level since late 2020, it said.
The report is based on surveys that CBBI, a provider of independent economic data, conducted with 4,354 businesses during the period.
“Short term disinflation is already here, with sales price growth slowing to a crawl,”it said. “The Covid blow to retail could push this into deflation in the first quarter.”
Consumer inflation slowed to 1.6% in November from 2.1% in the prior month as Covid disruptions suppressed demand, official data showed. Economists polled by Bloomberg expect full-year inflation to remain relatively subdued at 2.3% this year even as economic growth picks up.
Inflation will likely return after the first quarter, but “will largely represent the making up of lost ground before fading,” CBBI said in the report.
Any sustained and substantial price increases would require prolonged policy easing, while China still faces long-term deflationary pressures from demographic challenges, it said.
©2023 Bloomberg L.P.