Chinese consumer prices rise the slowest in 4 months, despite encouragement from Reuters
Beijing – China’s consumer prices rose at their slowest pace in four months in October as a decline in producer prices widened, data showed on Saturday, as Beijing doubled down on stimulus to support the ailing economy.
In its latest stimulus measures, the country’s top legislature approved a 10 trillion yuan ($1.4 trillion) package on Friday to ease the burden of the local government’s “hidden debts,” rather than injecting money directly into the world’s second-largest economy, as some investors have done. hope.
Analysts say the package will do little to boost economic activity, demand and prices in the near term.
The consumer price index (CPI) rose 0.3% from a year earlier last month, down from a 0.4% rise in September and marking the lowest since June, data from the National Bureau of Statistics showed, missing the forecast for a 0.4% rise. in a Reuters poll. economists.
However, headline inflation, excluding volatile food and fuel prices, rose 0.2% in October, up from 0.1% in September.
“Due to the Golden Week holiday in October, the impact of domestic stimulus policies issued since late September has yet to be seen,” said Bruce Pang, an economist at JLL.
He expected the CPI to push up inflation while core inflation remains soft, opening the door for the authorities to cut interest rates early next year.
China’s central bank in late September unveiled the most aggressive financing measures since the COVID-19 pandemic to revive economic growth.
MORE SUPPORT IS EXPECTED
The much-anticipated stimulus package passed on Friday by the National People’s Congress standing committee may leave investors speculating on a fiscal bazooka dismayed, as it has failed as expected with strong policy measures to boost consumption and restructure the economy.
Finance Minister Lan Foan signaled on Friday that there is stimulus ahead, telling a press conference that tax policies to support the housing market will come soon and that authorities are speeding up the work to revive banks.
Some analysts say Beijing may want to keep economic ammunition until Donald Trump resumes the US presidency in January.
On a month-on-month basis, China’s CPI fell 0.3%, compared to an unchanged result in September and below forecasts for a 0.1% decline.
The drop in food prices lowered the monthly CPI, Dong Lijuan of the statistics bureau said in a statement.
With 70% of China’s domestic wealth tied up in the ailing housing sector, which at its peak made up a quarter of the economy, consumers are holding on to their cash, putting the economy under inflationary pressure.
China’s consumer inflation is likely to remain low next year at 0.8%, while producer prices will not change until the third quarter of 2025, Goldman Sachs said in a paper this month.
Producer prices fell 2.9% year-on-year in October, deeper than the 2.8% drop last month and below the 2.5% drop. It marked the biggest drop in 11 months.
Factory-gate energy cuts are deep in the petroleum and mining, oil and coal processing, chemical products and automobile manufacturing sectors.
“The implementation of some better-than-expected adjustment policies is expected to boost consumption and investment momentum,” said Zhou Maohua, chief economist at China Everbright (OTC:) Bank.
“But the recovery in the domestic housing market, housing consumption and the balance of supply and demand will take time.”
($1 = 7.1785 lots)
