China is facing heightened deflationary pressures as consumer prices experienced a notable decline of 0.2% on a year-on-year basis in October, compared to a steady reading in September, according to the latest data released by the National Bureau of Statistics.
This downward trend is attributed to an increased supply of agricultural products due to favorable weather conditions. Additionally, signs of reduced consumption emerged following the Golden Week break at the beginning of the month.
A closer look at the data reveals that food prices registered a significant drop of -4.0% compared to September, marking the fourth consecutive month of decline and reaching the lowest level in 25 months.
Weaker pork prices, plummeting by -30.1% year-on-year, have notably contributed to this downturn, underscoring a lack of demand in the market. Furthermore, core inflation recorded a four-month low, decreasing by -0.7% year-on-year compared to September’s +1.9% year-on-year figure.
On a month-on-month basis, headline inflation also experienced a dip, decreasing by 0.1% in October compared to a 0.2% increase in September.
The data signals that deflationary pressures remain a substantial risk to China’s economic growth prospects. Contributing factors include lackluster domestic demand, persistent challenges in the property market, a local debt crisis, and policy disparities with Western countries.
The unfavorable outlook for the Chinese economy underscores the pressing need for additional monetary policy easing and fiscal support to maintain stability in the short term. Policymakers face the challenge of navigating these complex dynamics to safeguard against potential economic downturns and ensure sustainable growth in the future.
