China's consumer prices fell 1.6 percent in February, adding the threat of deflation to the nation's other economic troubles. Tuesday's report from China's statistics bureau says falling food prices helped push overall prices down for the first time since December of 2002. China's key measure of inflation, the consumer price index, fell below zero. When the inflation rate falls below zero percent economists call the situation "deflation".
Deflation can make a slowing economy worse, because falling prices give consumers an incentive to delay purchases until prices fall further. That delay slows overall economic activity and can cause a deflationary spiral. There was also bad news on the trade front, with China's exports falling 17.5 percent in January from a year earlier.