October CPI falls, PPI remains negative for 13th consecutive month.


Consumer prices in China fell by 0.2% in October, reflecting the struggles of the second-largest world economic power in its post-Covid recovery. The decline exceeded the 0.1% expected by experts and came after the consumer price index was unexpectedly flat in September. Producer prices also dropped, declining by 2.6% in the last month, a trend that has been ongoing for 13 consecutive months.

Since both consumer and producer prices are down, experts believe that China is still in a deflationary environment and that domestic demand remains slow. The need for further policy support, plus ongoing concerns related to the debt crisis in the property sector, have not helped improve consumer confidence. However, targeted policy support and potential support for property developers could improve domestic demand for 2023. Investors are closely monitoring the Singles Day shopping festival to gauge Chinese consumption trends, but experts believe excitement about the event has diminished due to changing consumer spending habits.

The unexpected decline in consumer prices in China is raising concerns, signifying sluggish consumer demand and factory deflationary pressures. The ongoing debt crisis in the property sector is a major factor contributing to this slow recovery, although potential policy support for developers could improve domestic demand in the coming year. Despite this, excitement about this year’s Singles Day shopping festival has waned, indicating a change in consumer spending behavior that could lead to muted sales.

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