The country’s consumer prices remained flat in September, according to figures released on Friday, again showing weak consumer demand as the world’s second largest economy continues to stumble out of the COVID pandemic. The consumer price index (CPI) came in below the 0.2% increase that analysts expected.

Consumer prices fell in July for the first time since 2021, sparking concerns that China was headed for deflation. A slight 0.1% increase in August briefly alleviated those fears, yet September’s disappointing data show that the country’s economy has yet to fully restore consumer confidence.

“CPI inflation at zero indicates the deflationary pressure in China is still a real risk to the economy. The recovery of domestic demand is not strong, without a significant boost from fiscal support,” Zhiwei Zhang, chief economist at Pinpoint Asset Management, said to Reuters.

China’s deflation difficulties are in stark contrast to the rest of the world’s inflation crisis over the last two years. Falling prices can lead to a cycle where consumer spending drops, followed by sinking profits, lower employment, and dropping investment.

Some recovery in China is underway. Factory activity expanded in September and domestic travel over the recently concluded Golden Week national holiday recovered to just above pre-COVID 2019 levels (though still lower than government forecasts).

Yet other data suggest significant challenges remain. China’s exports fell 6.2% year-on-year last month, according to customs data released Friday—though that sharp drop was less than what economists expected. Imports also fell by 6.2% last month.

“September’s inflation data remind us that despite some firming in activity indicators recently, China’s economic recovery remains challenged,” said Robert Carnell, head of research for Asia-Pacific for ING, in a note to clients.

China’s property sector remains in a slump with private developer Country Garden warning earlier this week that its first-ever default could come soon. The country also faces a youth joblessness crisis, with over 20% of those ages 16 to 24 out of work in June, the last time China’s statistics bureau reported the statistic.

Against this uncertain backdrop, the International Monetary Fund slightly trimmed its China growth forecast for 2023 to 5%, blaming China’s real estate crisis and weakening confidence.