An employee works on the assembly line of LED lighting products in China.
Vcg | Visual China Group | Getty Images
Chinese consumer prices fell in October as the world’s second-largest economy suffered an uneven recovery from the Covid-19 crisis.
Data from China’s National Bureau of Statistics showed on Thursday that October’s consumer price index shrank 0.2% year on year, more than the 0.1% decline expected by economists polled by Reuters.
This comes after China’s CPI was unexpectedly flat in September, underscoring the need for further policy support.
Producer prices fell 2.6%, slightly less than the expected 2.7% decline, and are in negative territory for the thirteenth month in a row. China’s PPI stood at 2.5% in September, indicating continued deflationary pressures in factories.
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“China is still in a deflationary environment. Domestic demand remains weak,” said Zhiwei Zhang, president and chief economist of Pinpoint Asset Management.
Beijing has provided targeted policy support even as recent data suggested growth remained sluggish. Consumer confidence is being further damaged by the ongoing debt crisis at two of China’s largest real estate developers. The Chinese real estate sector represents approximately 30% of the Chinese economy.
“With the budget deficit rising and developers potentially receiving support from the government, domestic demand is likely to improve next year,” Zhang said.
Investors will now keep an eye on this year’s Singles Day shopping festival, which ends on November 11, to gauge the strength of Chinese consumption.
But excitement about the shopping festival has waned.
“I think the Singles Day sale this year has not lived up to expectations,” Hao Hong, partner and chief economist at Grow Investment Group, told CNBC’s “Squawk Box Asia.”
“People haven’t spent a lot of money on the Singles Day sale since last year, so it’s going to be a quiet sales year,” Hong said.