BEIJING (Reuters) – China’s consumer prices rose in October at the slowest pace in four months, while producer price deflation deepened, data showed on Saturday, even as Beijing doubled down on stimulus to support the economy. faltering economy.
In its latest stimulus measures, the country’s top legislature on Friday approved a 10 trillion yuan ($1.4 trillion) package to ease the burden of “hidden debt” on local governments, instead of injecting money directly into the world’s second-largest economy, as some investors had done. expected.
Analysts say the package will likely do little to boost economic activity, demand and prices in the near term.
The consumer price index (CPI) rose 0.3% year-on-year last month, slowing from September’s 0.4% rise and marking the lowest level since June, data from the National Statistics Office showed , below the 0.4% increase predicted in a Reuters poll. of economists.
However, core inflation, excluding volatile food and fuel prices, rose 0.2% in October, accelerating from 0.1% in September.
“Due to the Golden Week holiday in October, the effect of stimulus policies to promote domestic demand issued since the end of September is not yet obvious,” said Bruce Pang, chief economist at JLL.
He expected the CPI to maintain an upward trend while core inflation remained subdued, opening up room for authorities to cut interest rates further early next year.
In late September, China’s central bank unveiled the most aggressive monetary support measures since the COVID-19 pandemic to revive economic growth.
MORE SUPPORT IS EXPECTED
The much-anticipated stimulus plan approved Friday by the standing committee of the National People’s Congress may leave investors who were speculating on a fiscal bazooka disappointed, as it fell short of expectations for strong policy measures to boost consumption and reflate the economy. .
Finance Minister Lan Foan indicated on Friday that more stimulus was coming, telling a news conference that fiscal policies to support the property market were coming soon and that authorities were accelerating work to recapitalize banks.
Some analysts say Beijing may want to preserve some economic ammunition until Donald Trump takes over the US presidency in January.
On a monthly basis, China’s CPI fell 0.3%, compared to an unchanged result in September and below an expected 0.1% drop.
Falling food prices dragged down the month-on-month CPI, Dong Lijuan of the statistics bureau said in a statement.
With 70% of Chinese household wealth tied up in the ailing real estate sector, which at its peak accounted for a quarter of the economy, consumers are holding on tightly to their money, subjecting the economy to deflationary pressures.
China’s headline consumer inflation will likely remain low next year at 0.8%, while producer prices will not turn positive until the third quarter of 2025, Goldman Sachs said in a note this month.
Producer prices fell 2.9% year-over-year in October, a deeper drop than the previous month’s 2.8% drop and below an expected 2.5% drop. It marked the biggest drop in 11 months.
Factory-level deflation deepened in the oil and extraction, oil and coal processing, chemical manufacturing, and automobile manufacturing sectors.
“The implementation of some better-than-expected countercyclical adjustment policies is expected to improve consumption and investment momentum,” said Zhou Maohua, macroeconomic researcher at China Everbright (OTC:) Bank.
“But a recovery of the domestic real estate market, household consumption and the balance between supply and demand would require some time.”
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