China’s CPI took a notable dip in January, registering decrease of -0.8% yoy, marking a significant deepening of deflationary pressures from the previous month’s -0.3% and falling short of expectation -0.5% yoy. This downturn represents the fourth consecutive negative reading and the most substantial fall observed since 2009, over fourteen years ago.

The decline was particularly pronounced in food prices, which was down -5.9% yoy. Meanwhile, core CPI, which excludes volatile energy and food prices, rose by a modest 0.4% yoy, slowing from December’s 0.6% yoy increase. Despite the annual downturn, CPI saw a slight month-on-month increase of 0.3%, albeit below the anticipated 0.4% growth.

The NBS attributed January’s inflation figures to the high base effect associated with the Spring Festival, or Lunar New Year, which occurred in January the previous year. This annual holiday, which shifts between January and February depending on the lunar calendar, significantly impacts consumption patterns and inflation metrics due to its influence on consumer spending and business operations.

In parallel, PPI fell by -2.5% yoy in January, showing a modest improvement from the -2.7% yoy observed in the previous month and slightly better than -2.6% forecast. This marks the 16th consecutive month of annual declines for PPI, with factory-gate prices decreasing by -0.2% mom, following -0.3% mom drop in December.

February economic data released from China are overwhelmingly poor, but unsurprising. Retail sales dropped -20.5% yoy versus expectation of -4.0% yoy. Industrial production dropped -13.5% yoy versus expectation of -3.0% yoy. Fixed asset investment dropped -24.5% ytd yoy versus expectation of -2.0% ytd yoy.

The National Bureau of Statistics sounded optimistic in its statement. It said, while the epidemic has incurred relatively big shocks to economic activities, the impacts are largely “short-term, external and controllable.” “The economy has withstood the shocks of the epidemic,” it added.