China’s consumer prices fell again

Customers pick tomatoes inside a morning market on August 9, 2023 in Beijing, China. REUTERS/Tingshu Wang/File Photo Get license rights

  • October CPI -0.2% y/y vs 0.0% in Sep
  • October CPI -0.1% m/m vs +0.2% in Sep
  • Oct PPI -2.6% y/y vs -2.5% Sep

BEIJING, Nov 9 (Reuters) – China’s consumer prices fell in October as key measures of domestic demand pointed to weakness not seen since the pandemic, while factory-gate deflation deepened, raising doubts about prospects for a broad-based economic recovery. .

The Consumer Price Index (CPI) fell 0.2% in October and fell 0.1% from September, data from the National Bureau of Statistics (NBS) showed on Thursday.

The declines dwarfed the average 0.1% year-on-year decline and a flat month-on-month reading predicted in a Reuters poll. Both indicators were last simultaneously negative in November 2020 during the COVID-19 pandemic.

The headline figure was pulled by a further decline in pork prices, down 30.1% from a 22% slide in September, amid an oversupply of hogs and weak demand.

However, core inflation, excluding food and fuel prices, eased to 0.6% in October from 0.8% in September, pointing to China’s continued battle with inflationary forces and the risk of again missing the government’s full-year inflation target. About 3%.

Consumer prices went deflationary in July and returned to positive territory in August but remained flat in September. Factory deflation continued for the 13th consecutive month in October.

Combined with other economic indicators, data for the fourth quarter so far suggest that a meaningful recovery remains elusive in the world’s second-largest economy.

“Combating persistent inflation amid weak demand remains a challenge for Chinese policymakers,” said Bruce Pang, chief economist at Jones Lang LaSalle.

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“An appropriate policy mix and additional supportive measures are needed to prevent the economy from spiraling downward in inflationary expectations that threaten business confidence and household spending.”

On a monthly basis, the CPI fell 0.1%, compared with a 0.2% gain in September.

The producer price index (PPI) fell 2.6% year-on-year against a 2.5% fall in September. Economists had forecast a 2.7% drop in October.

Reuters Graphics

Officials have repeatedly downplayed the risks.

“There is no deflation in China and there will be no deflation in the near future,” a Bureau of Statistics official said in August.

Beijing has stepped up measures to support the broader economy, including a 1 trillion yuan ($137.43 billion) sovereign bond issue and a move to allow local governments to frontload part of their 2024 bond allocations.

But the asset crisis, local credit risks and policy divergence with the West are complicating the recovery process.

Recent indicators of the economy are mixed.

China’s imports unexpectedly grew in October, while exports contracted at a faster pace. Meanwhile, the official Purchasing Managers’ Index showed an unexpected contraction in factory activity last month and a slowdown in services activity.

China also recorded its first quarterly deficit in foreign direct investment (FDI), underscoring capital outflow pressure following “risk-off” moves by Western governments.

“We expect China’s economy to grow 5.0% in 2023, in line with the target set by the authorities, followed by 4.0% growth in 2024 and 2025,” Moody’s said Thursday.

“However, we see downside risks to China’s trend growth due to structural factors.”

Reporting by Liangping Gao, Ella Gao, and Ryan Wu; Editing by Sam Holmes

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