**China’s October CPI Inflation Data: Disappointing Figures Signal Tepid Domestic Demand**
*By FXStreet staff, originally reported by Dhwani Mehta. Expanded and updated with additional sources and context.*
China’s consumer inflation remained flat in October, with the Consumer Price Index (CPI) rising just 0.2% year-on-year, according to data published by the National Bureau of Statistics (NBS) on November 9, 2023. This reading missed already subdued expectations of 0.0% and highlights persistent deflationary pressure across the world’s second-largest economy. The producer prices, meanwhile, contracted for the thirteenth consecutive month, reflecting weak industrial and manufacturing activity.
This report adds to growing concerns about the sustainability of China’s post-COVID economic recovery. Despite various stimulus measures deployed throughout 2023, including monetary easing and higher infrastructure spending, consumer demand remains sluggish, and investor confidence is low.
This article provides a detailed breakdown of the CPI report and contextualizes it within broader macroeconomic and market trends.
### October 2023 CPI Highlights
According to the official data released by the NBS:
– **Year-on-year CPI growth**: +0.2% in October vs. 0.0% expected and -0.2% in September
– **Month-on-month CPI figure**: -0.1% vs. +0.2% in September
– **Core CPI (excluding food and energy prices)**: +0.6% year-on-year (unchanged from September)
The core CPI, which is seen as a better measure of underlying inflationary pressure, remained stable but subdued. The headline CPI increase of just 0.2% on an annualized basis reveals persistent weakness in demand, leaving additional room for policymakers to add further monetary stimulus.
### Key Drivers Behind the Weak CPI Data
Several factors contributed to the lower-than-expected CPI reading:
– **Food Prices**: Food prices dropped 4.0% year-on-year after falling 3.2% in September. Within the category:
– Pork prices plunged 30.1% year-on-year, a steeper fall compared to 22.0% in September, due to abundant supply and weak demand.
– Fresh vegetable prices also fell, declining 1.9% from a year ago.
– **Non-Food Inflation**: Rose by just 0.7% annually, showing limited price pressure in services and consumer goods. This includes:
– Transportation and communication costs falling 1.7% year-on-year.
– Clothing prices up 1.5%.
– Health care services rose by 1.5% year-on-year.
– **Weak Seasonal Demand**: October typically sees an uptick in consumption from the Golden Week holiday. However, spending momentum was sluggish, reflecting waning consumer confidence.
### October 2023 PPI (Producer Price Index) Data
In the same release, the NBS also reported that China’s PPI fell by 2.6% year-on-year in October, compared to a 2.5% decline in September. This marks the 13th consecutive month of producer deflation.
Key highlights of the PPI data:
– **Monthly PPI**: Dropped 0.1% compared to September
– **Industrial Goods Prices**: Continued their descent due to lower raw materials and energy costs
– **Manufacturing strains**: Reflect weak export demand and overcapacity in various sectors, such as steel, chemicals, and construction materials
The continued slide in producer prices indicates weaker profit margins for manufacturers and underlines the challenges faced by the industrial sector amid global economic uncertainty and soft external demand.
### Interpretation and Policy Implications
China’s subdued inflation figures come at a critical time when the government is trying to stimulate growth through a combination of fiscal and monetary policy tools. The People’s Bank of China (PBoC) has already cut rates multiple
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