China’s factory gate prices fell into negative territory in October, official data showed on Wednesday, while consumer inflation softened, as rolling lockdowns and weakening global demand weighed heavily.
According to the National Bureau of Statistics, the producer price index fell 1.3% year-on-year, reversing a 0.9% gain in September and the lowest since December 2020. It was, however, marginally better than consensus expectations for a 1.5% decline.
Consumer price inflation, meanwhile, fell to 2.1% from 2.8% in September, below expectations for around 2.4%. Core CPI, which strips out more volatile elements, was unchanged at 0.6% year-on-year.
Food prices rose 7.0%, from 8.8% in September, but pork prices continue to mount, rocketing 51.8% compared to 36% a month ago.
Overall, inflation in China – in contrast to other global economies – has remained subdued over the last year. Beijing is pursuing a strict policy of zero-Covid, leading to stringent lockdowns and denting both production and demand.
Pantheon Macroeconomics noted: “In a global economy suffering from high inflation, China’s CPI disinflationary trend is symptomatic of weak domestic demand and labour market slack, which in turn are rooted in the property sector’s malaise and the unswerving adherence to zero-Covid policy.
“We think CPI will continue to slow, as the impact of weak domestic demand and the influence of slowing cost-push energy inflation outweigh the sharp increase in pork prices.
“The move into producer goods deflation was led by a 6.7% drop in mining PPI, down from 3.5% in September, reflecting weaker energy prices and upstream demand from heavy industries and property construction.
“We expect PPI to continue to trend lower, owing the impact of overcapacity in materials sectors. Stimulus is driving infrastructure and manufacturing capacity investment, but this provides only a partial offset to the still weak demand from property construction.”
