BUSINESS-ECONOMY
China's deflationary problems worsened in September, with consumer prices still weak and factory gate prices continuing to fall. The consumer price index increased 0.4 per cent from the past year, though it was pushed into positive territory only by a spike in fresh vegetable prices. Core CPI rose 0.1 per cent in September, the smallest since February 2021, while producer inflation decreased for the 24th month in a row, according to National Bureau of Statistics data released on Sunday. Producer inflation decreased by 2.8 per cent, year-over-year, slightly higher than economists had predicted a fall of 2.6 per cent. Food inflation surged by 3.3 per cent in September compared with the same period last year, and fresh vegetable prices climbed 22.9 per cent after advancing 21.8 per cent in August, boosting inflation by 0.48 percentage points. Weather conditions and seasonal demand ahead of a week-long holiday in China most probably led to increased fruit and vegetable prices. The figures underscore the weakness of domestic demand before policymakers implemented a series of stimulus measures in late September to revive the economy. China is suffering its longest period of deflation since the 1990s, with a broad gauge of economy-wide prices falling for five consecutive quarters through June — a trend that likely continued through September. Beijing has set interest rates lower and backed the property and stock markets since late September. The Finance Ministry promised further aid for the ailing property sector and indebted local governments. “The overall inflation is still significantly lower than the policy target and demand is still weak,” said Bruce Pang, chief economist for Greater China at Jones Lang LaSalle Inc. “With the effective implementation of existing policies and the launch of new measures, it is expected that consumer and producer confidence and expectations will be effectively boosted with market demand gradually recovering.” In sectors like solar and electric vehicles, weak consumption and a rapid rise in output have unleashed fierce price wars. Prices of so-called transportation facilities, including cars, dropped 5.3 per cent, while automobile manufacturers saw their sale prices decline 2.3 per cent. Declining prices are worrying since they may lead to a vicious cycle of lower spending and investment because it tends to result in a slower economy and high unemployment. This article includes reporting from Bloomberg. None
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