China’s Struggles With Supply Glut Threaten to Extend Deflation

China’s intensifying deflationary pressure threatens to persist long after seasonal distortions fade away, unless the government drains excess capacity in the economy that’s putting pressure on prices.

Consumer inflation in the year to date has turned negative through January-February for the first time since 2021. While an earlier-than-usual Lunar New Year holiday helped push price growth below zero last month, the downswing was far sharper than predicted, suggesting inflation was feeble even when adjusted for seasonality.