China’s consumer prices swing to declines in October

China’s consumer prices fell in October, as the world’s second-largest economy struggled with an uneven post-Covid recovery.

Data from China’s National Bureau of Statistics on Thursday showed October consumer price index shrank 0.2% year-on-year, more than the 0.1% decline expected by economists polled by Reuters.

This comes after China’s CPI was unexpectedly flat in September, highlighting the need for further policy support.

Producer prices declined 2.6%, slightly smaller than an expected decline of 2.7% and has been in negative territory for the 13th straight month. China’s PPI was at 2.5% in September, showing factory deflationary pressures remained.

“China is still in a deflationary environment. The domestic demand remains sluggish,” said Zhiwei Zhang, president and chief economist of Pinpoint Asset Management.

Beijing has provided targeted policy support even as recent data suggested growth has remained sluggish. Further hurting consumer confidence is an ongoing debt crisis in two of China’s largest real estate developers. China’s property sector makes up about 30% of its economy.

“With the budget deficit rising and the property developers potentially gaining support from the government, domestic demand will likely improve next year,” Zhang said.