Customers select tomatoes at a stall at a morning market in Beijing, China, August 9, 2023. Portal/Tingshu Wang/File Photo Acquire License Rights
- CPI in Oct -0.2% y/y vs. 0.0% in September
- CPI in Oct -0.1% m/m vs +0.2% in September
- Oct PPI -2.6% y/y vs. -2.5% in September
BEIJING, Nov 9 (Portal) – China’s consumer prices fell in October as key indicators of domestic demand pointed to weakness not seen since the pandemic, while factory deflation worsened, raising doubts about the chances of a broad-based economic recovery.
The consumer price index (CPI) fell 0.2% in October from a year earlier and 0.1% from September, data from the National Bureau of Statistics (NBS) showed on Thursday.
The declines were below the average 0.1% year-on-year decline forecast in a Portal poll and flat from the previous month. Both indicators were last negative at the same time in November 2020 during the COVID-19 pandemic.
The headline figure was weighed down by a further 30.1% fall in pork prices, accelerating from a 22% decline in September amid a glut of hogs and weak demand.
However, even core inflation, which excludes food and fuel prices, slowed to 0.6% in October from 0.8% in September, suggesting that China continues to battle disinflationary forces and risks remaining set by the government Overall inflation target for the year as a whole was once again missed by around 3%.
Consumer prices fell into deflation in July and returned to positive territory in August, but remained unchanged in September. Factory deflation continued for the 13th consecutive month in October.
Combined with other economic indicators, fourth-quarter data so far suggests that a meaningful recovery in the world’s second-largest economy remains a long way off.
“The data shows that tackling ongoing disinflation amid weak demand remains a challenge for Chinese policymakers,” said Bruce Pang, chief economist at Jones Lang Lasalle.
“An appropriate policy mix and more supportive measures are needed to prevent a downward trend in inflation expectations in the economy, which could threaten business confidence and household spending.”
Month-on-month, the CPI fell 0.1%, compared to a 0.2% increase in September.
The producer price index (PPI) fell 2.6% year-on-year, compared with a 2.5% decline in September. Economists had forecast a 2.7% decline for October.
Portal graphics
The authorities have repeatedly downplayed the risks.
“There is no deflation in China and there will be no deflation in the future,” a statistics bureau official said in August.
Beijing has stepped up measures to support the overall economy, including issuing 1 trillion yuan ($137.43 billion) of government bonds and a measure allowing local governments to advance part of their 2024 bond quotas.
But a real estate crisis, local debt risks and political divergences with the West are complicating the recovery process.
Recent economic indicators have been mixed.
China’s imports rose unexpectedly in October, while exports contracted faster. Meanwhile, the official purchasing managers’ index showed that factory activity unexpectedly fell last month and services activity slowed.
China also posted a foreign direct investment (FDI) deficit for the first time in a quarter, underscoring capital outflow pressures following Western governments’ “risk reduction” measures.
“We expect China’s economy to grow by 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 on Thursday.
“However, we see downside risks to China’s trend growth due to structural factors.”
reporting by Liangping Gao, Ella Cao and Ryan Woo; Editing by Sam Holmes
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