Lana

Not as bad as the 900,000 cut estimated in September, but still a tough stat to celebrate.

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China has long struggled with falling prices, or deflation, largely because its factories churn out more goods than local shoppers want.

So firms are forced to keep cutting prices to try and lure cost-conscious customers in.

But ultimately, that's a short-term win at the cost of profit margins and therefore wage increases.

Then, in a vicious cycle, workers are even less willing to part with their hard-earned cash, and the latest data shows little sign of that changing.

Sure, producer prices — what factories can charge for their wares — were only 1.4% lower this January than last, the smallest drop in months, and a better outcome than economists expected.

Thing is, that mainly reflected pricier input costs and a tight grip on supply, not a shift in actual demand.

That's partly due to households keeping their budgets tight.

See, China's consumer prices, while not actively shrinking like its producer ones, are still looking pretty dismal.

January's main print slowed sharply from December, and even the core measure, which cuts out volatile food and energy costs, cooled down.

Until shoppers start spending more freely, firms will struggle to lift prices and, in turn, profit.

Local governments seem to see the writing on the wall, with many lowering their growth targets for the year.

Economists think the national government might follow suit and trim the country-wide goal to around 4.5 percent, a notch below the roughly 5 percent mark that officials have gunned for in recent years.

If China does stop pushing for a revved-up recovery, the government might send less state support to vulnerable areas, including manufacturing.