China's consumer prices barely rising - pressure on the economy

The consumer price index for June showed an increase of 0.2 percent compared to the same month last year and thus only a slight rise in prices, according to the statistics office in Beijing. Analysts had expected an increase of 0.4 percent. The index also rose by only 0.3 percent year-on-year in May.

According to the statisticians, certain vegetables were cheaper due to seasonal factors. The experts also recorded lower petrol prices due to fluctuations on the international oil market. As the summer vacations approached, consumers had to dig deeper into their pockets for airline tickets, for example.

Further threat of falling prices

Although prices in the world's second-largest economy are rising slightly, they are remaining steadily close to the zero line. Compared to May, the index even fell by 0.2 percent in June, which indicates continuing deflationary pressure. Deflation is the opposite of inflation, i.e. a fall in prices. At first glance, this has advantages for consumers, but economists consider deflation to be disadvantageous in the long term because companies earn less, which can cause wages to fall and put jobs at risk.

According to reports, major companies in China have already cut jobs this year. In any case, young people in China in particular are struggling to find a job. At the same time, more and more people are working in casual or freelance jobs. In times of economic uncertainty, positions at China's state-owned companies, which usually offer little flexibility but job security, are also becoming more popular.

Important meeting coming up

The unfavorable development of consumer prices from an economic perspective is also linked to the fact that people in China are not consuming enough - an effect of unemployment and the ongoing real estate crisis, which is encouraging many people to save.

Experts see boosting consumption as an important means of supporting China's economic recovery. Observers are therefore waiting to see whether the ruling Communist Party will announce corresponding long-term reforms at a meeting next week.