(Bloomberg) — China’s consumer inflation was anemic in October while factory-gate prices continued falling, suggesting the government’s latest round of stimulus is far from sufficient to free the economy from the grip of deflation.
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The consumer price index rose 0.3% from a year earlier, the National Bureau of Statistics said Saturday, compared with a 0.4% gain in the previous month. The median forecast of economists surveyed by Bloomberg was for the reading to stay unchanged from September.
Core CPI — which excludes volatile food and fuel prices increased 0.2%. Producer inflation slid for a 25th straight month, with a 2.9% drop on year, more than the 2.5% decrease predicted by economists.
The persistence of near-zero inflation offers the latest evidence of China’s domestic demand staying subdued despite Beijing’s stimulus measures since late September that included interest-rate cuts, more cash for bank lending, and support for the stocks and property markets.
A $1.4 trillion fiscal package unveiled a day before the data release is focused on easing the debt burden on local authorities to give them greater scope to drive economic growth. Many economists and investors argue China will struggle to foster reflation without looser fiscal policy that supports demand and improves sentiment.
The government may come under more pressure to step up policies to bolster consumption, as Chinese exports — a key driver of the country’s growth this year — face the risk of significantly higher tariffs threatened by US President-elect Donald Trump.
Chinese authorities have struggled to boost household spending after a years-long real estate slump and a weak job market hollowed out confidence. Falling producer prices are also squeezing companies’ profits and making them reluctant to invest.
An entrenched cycle of price decreases risks holding consumers back from spending in anticipation that goods will be cheaper in the future.
–With assistance from Tian Ying.
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