BEIJING: China slipped back into deflation in October, data showed on Thursday, highlighting the work officials have in reviving still-sluggish demand in the world’s No. 2 economy.
The figures come after figures earlier in the week showed a forecast-busting bounce in imports that had lifted hopes the country’s vast army of consumers was beginning to stir.
The consumer price index, the main gauge of inflation, fell 0.2 percent on-year, according to the National Bureau of Statistics.
Thursday’s reading was twice as big as expected in a Bloomberg survey and marked a return to deflation, having recovered marginally in September and August from July’s 0.3-percent drop.
NBS official Dong Lijuan said in a statement that the fall was linked to declining consumer demand following the mid-Autumn holiday, as well as other factors including a high supply of agricultural products.
While deflation suggests goods were cheaper, it poses a threat to the broader economy as consumers tend to postpone purchases in the hopes of further reductions.
A lack of demand can then force companies to cut production, freeze hiring or lay off workers, and agree to new discounts to sell off their stocks — dampening profitability even as costs remain the same.
Food, tobacco and alcohol prices recorded the largest falls in October, with the NBS saying pork, in particular, plunged 30.1 percent.
China experienced a short period of deflation at the end of 2020 and early 2021, largely because of a collapse in the price of pork, the most widely consumed meat in the country. Prior to that, the last deflationary period was in 2009.
The NBS also said producer prices sank for the 13th month in a row, tumbling 2.6 percent, against the 2.7-percent forecast in the Bloomberg survey, suggesting more weakness down the road.
Data Monday showed imports saw a surprise rise in October, bucking a forecast drop and the first month of on-year growth since late last year. The rise in imports could be a signal that domestic demand in China is recovering from months of weakness.
The latest readings will likely put pressure on authorities to target consumer demand with fresh stimulus.
Zhiwei Zhang, chief economist at Pinpoint Asset Management, said the data showed that “domestic demand remains sluggish.”
But he pointed to signs that Beijing is stepping up support for the ailing economy.
“With the budget deficit rising and the property developers … gaining support from the government, domestic demand will likely improve next year,” Zhang said.
The government has reacted in recent months, unveiling a series of measures — particularly aimed at the property sector — and announcing a huge infrastructure spending plan.