On May 11, 2024, people bought fruits at the farmers market in Lianyungang City, Jiangsu Province, China.
VCG | Visual China Group | Getty Images
Data showed on Saturday that China’s consumer prices rose at the slowest pace in four months in October, while producer price deflation deepened, even as Beijing stepped up stimulus efforts to support the struggling economy.
In the latest stimulus measure, China’s top legislator on Friday approved a 10 trillion yuan ($1.4 trillion) package to ease the burden of “hidden debt” on local governments, rather than as some investors It is believed to be a direct injection of money into the world’s second largest economy.
Analysts said the plan may do little to boost economic activity, demand and prices in the short term.
Data from the National Bureau of Statistics showed that the Consumer Price Index (CPI) increased by 0.3% year-on-year last month, which slowed down from the 0.4% increase in September and hit the lowest level since June. It was lower than the 0.4% increase predicted by a Reuters survey. economist.
However, excluding volatile food and fuel prices, core inflation rose 0.2% in October, up from 0.1% in September.
“Due to the Golden Week holiday in October, the effect of the policies to stimulate domestic demand introduced since late September is not yet obvious,” said Pang Xiaolong, chief economist at Jones Lang LaSalle.
He expects CPI to maintain its upward trend, while core inflation remains moderate, creating room for the authorities to further cut interest rates early next year.
China’s central bank launched its most aggressive monetary support measures since the COVID-19 pandemic in late September to revive economic growth.
More support is expected
The much-anticipated stimulus package passed by the Standing Committee of the National People’s Congress on Friday is likely to disappoint investors speculating on fiscal bazookas as it falls short of expectations of strong policy measures to spur consumption and reflation.
Finance Minister Lan Fuan said on Friday that more stimulus measures were on the way. He told a press conference that tax policies to support the real estate market were coming and authorities were accelerating bank recapitalization efforts.
Some analysts say Beijing may want to retain some economic ammunition until Donald Trump Reinstated President of the United States in January.
From a month-on-month perspective, China’s CPI fell by 0.3%, the same as September, lower than the expected 0.1% decline.
Dong Lijuan of the Bureau of Statistics said in a statement that falling food prices dragged down the quarterly decline in CPI.
With 70% of China’s household wealth tied to the ailing real estate sector, which at its peak accounted for a quarter of the economy, consumers are holding on to their money and putting the economy under deflationary pressure.
Goldman Sachs said in a report this month that China’s overall consumer inflation rate is likely to remain as low as 0.8% next year, while the producer price index will not turn positive until the third quarter of 2025.
Producer prices fell by 2.9% year-on-year in October, which was higher than the 2.8% decline in the previous month and lower than the expected 2.5% decline. It was the biggest drop in 11 months.
Deflation intensified in factories in industries such as oil and gas extraction, oil and coal processing, chemical product manufacturing, and automobile manufacturing.
Zhou Maohua, a macroeconomic researcher at China Everbright Bank, said the implementation of some better-than-expected countercyclical adjustment policies is expected to improve consumption and investment dynamics.
“But the recovery of the domestic real estate market, household consumption and the balance between supply and demand will take some time.”
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