• GDP deflator reflects broader picture than consumer prices
  • Weak consumer confidence, housing slump dragging on growth

A Chinese measure of economy-wide prices marked its longest slide since 1999, underscoring deep deflationary pressures that are weighing on the world’s second-largest economy.

The gross domestic product deflator fell 1.5% in the fourth quarter, according to Bloomberg calculations based on official data released Wednesday. That marked the third straight quarter of declines, as weak consumer confidence and a slump in the property market continue to drag on prices.

The gauge is calculated using the difference between nominal and real GDP growth, and reflects a broader picture of the economy that’s not limited to consumer prices. China doesn’t publish an official GDP deflator figure.

China has struggled to revive domestic demand and consumer confidence after a post-pandemic recovery last year failed to find its footing. Deflation continues to pose one of the main challenges to the economy, along with the property sector’s record slump and an uncertain regulatory environment.

Authorities have avoided acknowledging the economy is in deflation despite the extended contraction in the GDP deflator gauge and a three-month straight decline in the consumer price index. Instead, they have called for a more positive depiction of the economy’s outlook and better guidance of public opinion.

Policymakers have signaled they will step up fiscal support this year and continue easing monetary policy but the question remains whether these measures will be enough to lift the economy out of deflation.

Economists have pointed out that the central bank’s previous easing has failed to move the needle, as households remain cautious and borrowing demand is still sluggish.

Written by: Bloomberg News — With assistance from John Liu and Yujing Liu @Bloomberg

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