China consumer prices return to growth in October

Deflationary pressures in China eased in October; consumer prices have started to grow again after falling for two consecutive months; But producer prices extended their decline to three years as the world’s second-largest economy suffered from weak domestic demand and a decline in exports.

Data released by China’s National Bureau of Statistics on Sunday showed the consumer price index for October read at 0.2%, compared to analysts’ expectations of zero or flat annual growth. Prices fell more than expected by 0.3% in September.

On a monthly basis, consumer prices also increased by 0.2%, compared to analysts’ expectations of zero growth.

Food prices, which negatively affected the country’s CPI, decreased by 2.9% on an annual basis. However, prices increased by 0.2% compared to the previous month.

Manufacturer prices October fell 2.1%It finished three years in negative territory, down 2.2% annually compared to Reuters poll estimates. This comes at a time when the country is witnessing violent price wars that require government intervention. Industrial overcapacity further suppressed prices. Monthly prices increased by 0.1%.

“In October, policies aimed at boosting domestic demand continued to be implemented, with a boost from the National Day and Mid-Autumn Festival holidays,” Dong Lijuan, chief statistician of the urban division of the National Bureau of Statistics, said in a statement. he said.

While China’s moves to curb price wars and boost demand appear to be bearing fruit, with the country’s industrial profits rising more than 21% in September, experts warn that China’s local governments’ dependence on tax revenue is encouraging sustainable production, increasing competition and overcapacity until meaningful tax changes occur.

China’s manufacturing activity fell more than expected in October, falling to a six-month low. official survey It was announced on October 30. Sub-indices related to production, new orders, raw material stock and employment all deepened the contraction, pointing to a sharp slowdown in manufacturing and weakening demand.

Chinese manufacturers have been grappling with demand uncertainty this year due to trade tensions with the United States and weak consumer confidence at home as Beijing grapples with a prolonged downturn in the housing sector and declines in exports.

The country’s exports in October unexpectedly contracted, while shipments to the United States posted double-digit declines, falling 25% for the seventh consecutive month, according to customs data released Thursday.

Going forward, export swings may weaken after US President Donald Trump and his Chinese counterpart Xi Jinping agreed to a trade ceasefire at their meeting in South Korea on October 30, eliminating a potentially provocative situation that had fueled concerns of a full-blown trade war.

China’s leadership last month promised to increase domestic consumption while preparing its economic road map for the next five years. According to CNBC’s translation, the text of the meeting stated that China should “strongly increase consumption.”

Leaders emphasized the need to increase consumption with calls to balance it with “effective investment” and “adhere to the strategic point of increasing domestic demand.”

— CNBC’s Anniek Bao and Evelyn Cheng contributed to this report.