China’s consumer prices rose at the slowest pace in four months in October, while deflation in producer prices worsened, as shown by data released on Saturday. This comes despite intensified stimulus efforts by Beijing to support the sluggish economy.
In a recent move, China’s top legislative body approved a 10 trillion yuan ($1.4 trillion) package on Friday to ease the “hidden debt” burdens of local governments. However, rather than directly injecting funds into the world’s second-largest economy as some investors had anticipated, the package is aimed at relieving local debt issues.
Analysts suggest this measure is unlikely to significantly boost economic activity, demand, or prices in the short term.
The consumer price index (CPI) rose 0.3% year-over-year in October, slowing from a 0.4% rise in September and reaching its lowest level since June, according to the National Bureau of Statistics. This increase fell short of the 0.4% gain anticipated in a Reuters poll of economists.
However, core inflation—which excludes volatile food and fuel prices—grew by 0.2% in October, up from 0.1% in September.
“Due to the Golden Week holiday in October, the impact of stimulus policies aimed at promoting domestic demand, which have been introduced since late September, has yet to be clearly seen,” commented Bruce Pang, JLL’s chief economist.
He anticipated that while CPI would continue its upward trend, core inflation would remain moderate, creating room for authorities to consider further interest rate cuts early next year.
In late September, China’s central bank announced its most aggressive monetary support measures since the pandemic in a bid to reignite economic growth.
The much-anticipated stimulus package approved Friday by the standing committee of the National People’s Congress may disappoint investors who hoped for a stronger fiscal stimulus to drive consumption and boost economic momentum.
Finance Minister Lan Foan indicated on Friday that additional measures are on the way, announcing at a press conference that new tax policies to support the housing market would be introduced soon, and that authorities are accelerating efforts to recapitalize banks.
Some analysts speculate that Beijing may want to reserve certain economic tools until Donald Trump takes office as U.S. president in January.
On a month-on-month basis, China’s CPI fell by 0.3%, compared with an unchanged rate in September and a forecasted decline of 0.1%.
Falling food prices contributed to the monthly CPI drop, as noted in a statement by Dong Lijuan from the statistics bureau.
With 70% of Chinese household wealth invested in the struggling real estate sector—which, at its peak, comprised a quarter of the economy—consumers are cautious with their spending, putting the economy under deflationary pressure.
According to a recent note by Goldman Sachs, China’s headline consumer inflation is expected to remain low next year at 0.8%, with producer prices unlikely to rise until the third quarter of 2025.
Producer prices dropped by 2.9% year-over-year in October, exceeding the 2.8% decline in the previous month and below the expected 2.5% decrease, marking the steepest fall in 11 months.
Factory-gate deflation intensified across sectors including petroleum and natural gas extraction, oil and coal processing, chemical manufacturing, and auto manufacturing.
Zhou Maohua, a macroeconomic researcher at China Everbright Bank, commented that “the implementation of certain counter-cyclical policies that exceeded expectations is likely to enhance consumption and investment momentum. However, a recovery in the domestic housing market, household spending, and a balanced supply-demand situation will take time.”
