China Consumer Prices Drop in October Amid Weak Demand, Raising Deflation Concerns
Deepening deflation in food prices, largely due to a 30% drop in pork prices, and persisting factory-gate deflation remain a concern, despite expert predictions of rebound in the coming months.
- China's consumer price index (CPI) dropped 0.2% in October year-on-year due to a slump in food prices, particularly pork, which dropped by 30.1%, amid an oversupply and weak demand.
- Pork accounts for an outsized portion of the consumer price index due to being China's most consumed meat. This has led to deflationary pressures and low consumer demand.
- Despite the CPI drop, it is argued that China is not experiencing 'deflation', but rather a low rate of inflation reflective of weak domestic demand.
- Producer prices, the prices that factories charge wholesalers for products, fell by 2.6% in October from a year earlier - a decline for the 13th consecutive month. This reflects uncertainty around China's recovery and expects to keep policymakers vigilant.
- Analysts expect core inflation to return above 1% in the first half of 2024 and predict a headline CPI rise over the coming months. Despite weak consumer prices, experts expect the scenario to improve as domestic demand gains momentum.
South China Morning Post 
CNN 
Barron's 
Sky News 
CNBC 
Reuters 
CNA 
