BEIJING - Deflationary pressure in China worsened in the fourth quarter as the economy slumped, with price growth likely to be subdued even when the economy rebounds later in 2023, according to China Beige Book International (CBBI). 

Companies recorded the weakest growth in wages and input costs since mid-2020 in the final three months of 2022, CBBI said in a report on Tuesday.

Growth in sales prices also slowed to the worst level since late 2020, it said.

The report is based on surveys that CBBI, a provider of independent economic data, conducted with 4,354 businesses during the period.

“Short-term disinflation is already here, with sales price growth slowing to a crawl,” it said. “The Covid-19 blow to retail could push this into deflation in the first quarter.”

Consumer inflation slowed to 1.6 per cent in November from 2.1 per cent in the prior month as pandemic disruptions suppressed demand, official data showed.

Economists polled by Bloomberg expect full-year inflation to remain relatively subdued at 2.3 per cent in 2023 even as economic growth picks up. 

Inflation will likely return after the first quarter but “will largely represent the making up of lost ground before fading”, CBBI said in the report. 

Any sustained and substantial price increases will require prolonged policy easing, while China still faces long-term deflationary pressures from demographic challenges, it added. BLOOMBERG