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Investing.com-- Chinese consumer and producer inflation contracted more than expected in February, underscoring the need for more stimulus measures from Beijing amid persistent disinflation in the country.
Chinese consumer price index inflation shrank 0.7% year-on-year, more than expectations for a drop of 0.4% and reversing course from a 0.5% increase in January, government data showed on Sunday.
CPI shrank 0.2% month-on-month, also more than expectations of 0.1%.
The reading showed a persistent deterioration in Chinese consumer spending, which has been a key driver of deflation in the country for the past two years. The reading also showed that recent efforts from Beijing to drive up private spending- such as introducing subsidies on several discretionary goods- were providing only limited support.
Weak local demand also dragged down factory gate inflation, with the producer price index shrinking 2.2% y-o-y- more than expectations of 2%, but improving mildly from the 2.3% contraction seen in the prior month. PPI inflation also contracted for the 29th consecutive month.
The inflation data highlighted the need for more economic support from Beijing, especially as the country grapples with increased trade tensions with the U.S.
China’s top government officials had last week flagged plans to increase fiscal spending and offer more economic support, especially to private consumption, in the coming months. But they did not provide any clear details on the planned measures.
The Chinese economy has been steadily cooling over the past two years, with disinflation- due to weak consumer sentiment and a prolonged property market decline- being a major source of pressure.
The country now faces increased economic headwinds from a brewing trade war with the U.S.. President Donald Trump had last week imposed 20% trade tariffs against the country.