China’s consumer inflation turns negative for the first time in over a year

China’s national consumer price index (CPI) dipped into negative territory in February, marking the first such decline in 13 months. The drop, reported by the National Bureau of Statistics on Sunday, reflects ongoing economic challenges despite government efforts to stabilize growth.

The CPI fell by 0.7% year-over-year in February, reversing a 0.5% increase recorded in January. The decline exceeded economists' expectations, which had projected a 0.5% annualized drop, according to a Reuters poll. On a month-to-month basis, consumer prices fell 0.2%, a stark contrast to January’s 0.7% rise.

The downturn in inflation is primarily attributed to lower food, tobacco, and alcohol prices, raising concerns about sluggish consumer demand in the world's second-largest economy.

As China grapples with weak domestic consumption, investors are closely watching whether Beijing’s stimulus measures will be effective in reviving economic momentum. Last week, the Chinese government set its 2025 GDP growth target at “around 5%” and outlined strategies to support economic expansion, with a particular focus on boosting domestic demand.

In addition, Beijing revised its annual consumer price inflation target to “around 2%,” the lowest level in over two decades, down from previous targets of 3% or higher. Analysts suggest this new goal serves more as an inflation ceiling than a benchmark to be reached.

Despite the government’s growth ambitions, achieving a 5% GDP increase may prove difficult. Persistently weak consumer spending and escalating trade tensions with the United States, particularly under President Donald Trump’s administration, add further uncertainty to China’s economic outlook.

As China continues to navigate these economic headwinds, market participants will be watching closely for signs of improvement in domestic consumption and the effectiveness of Beijing’s policy measures in restoring growth.