(Bloomberg) -- China’s deflationary pressures were most severe in its industrial sector for a second straight year, in a sign of a deep imbalance between supply and demand that’s driving prices lower across the economy and inflaming trade tensions.
Most Read from Bloomberg
-
How Sanctuary Cities Are Preparing for Another Showdown With Trump
-
NYC Commuters Get New Way to Dodge Traffic: $95 Helicopter Rides
-
Deadly Landslide of Garbage Displays Uganda's Missed Opportunity
-
Scaramucci, Ackman Donate to Whitney Tilson’s NYC Mayoral Run
Industry, which mainly consists of manufacturing, recorded a 2.3% fall in prices last year, the steepest drop among all sectors, according to Bloomberg calculations based on official data published Saturday. Real estate and transportation trailed closely behind.
The world’s second-largest economy is experiencing entrenched deflation, which reflects chronic weakness of domestic demand in contrast with robust production. The gross domestic product deflator, the broadest measure of prices, dropped 0.8% last year. It is expected to decline again in 2025 for the third straight year, which would be the longest streak in decades.
Intense competition between factories — which make up 80% of the industrial sector — has pushed export prices lower and squeezed companies’ profit margins. That’s boosted overseas shipments and led to a record trade surplus of nearly $1 trillion last year, prompting a wave of protectionist countermeasures across the globe.
After industry, the real estate sector contributed the most to the economy’s deflation in 2024 as a years-long property market downturn dragged on. It stabilized only after Beijing’s stimulus blitz in late September, with official data recording the first expansion in seven quarters in the October-December period.
The improvement likely reflected a rebound in housing sales in the final two months of the year. Other property-related activities such as investment continued to decline, weighing on the growth of construction and other sectors.
“For the housing sector as a whole, it is still too early to call a turning point yet,” said Ding Shuang, chief economist for Greater China and North Asia at Standard Chartered Plc.
China’s statistics bureau revised up the size of GDP in 2023 by 2.7% after an economic census concluded in December, a change partly attributed to an adjustment in methodology.
The new method estimates the value of housing services of owner‐occupied homes based on rents charged for similar properties.