China consumer prices return to growth in October

Deflationary pressures eased in China in October, with consumer prices returning to growth after falling for two straight months, although producer prices continued to decline for three years amid weak domestic demand and falling exports.

Data released by the Chinese National Bureau of Statistics on Sunday showed the Consumer Price Index reading of… October at 0.2%Compared to analysts’ expectations of zero or flat growth on an annual basis. October’s reading was the strongest this year, and the first positive growth in consumer prices since June.

On a monthly basis, the Consumer Price Index rose by 0.2%, compared to analysts’ expectations of zero growth.

Food prices, which have been a drag on the country’s consumer price index, fell by 2.9% year-on-year. However, prices rose by 0.2% compared to the previous month.

Moderate shrinkage at the factory gate with prices 2.1% declineOn an annual basis, compared to Reuters poll estimates of a decline of 2.2%, completing three years in negative territory. Producer prices rose on a monthly basis by 0.1% in October.

“In October, policies to expand domestic demand continued to emerge, along with the push from the National Day and Mid-Autumn Festival holidays,” Dong Lijuan, chief statistician of the Urban Department of the National Bureau of Statistics, said in a statement.

While the steps taken by China to curb price wars and fuel demand appear to be bearing fruit, with industrial profits in the country rising in September by more than 21%. Experts warn Chinese local governments’ reliance on tax revenues encourages sustainable production, increases competition and spare capacity until meaningful tax changes are introduced.

China’s manufacturing activity fell more than expected in October, contracting to its lowest level in six months, according to a report from the European Central Bank. Official survey Released on October 30. The sub-indices for production, new orders, raw material inventories and employment deepened their contraction, indicating a sharp slowdown in manufacturing and weak demand.

Chinese producers are grappling with uncertainty about demand due to trade tensions with the United States this year and weak consumer confidence at home as Beijing suffers from a prolonged decline in the housing market and headwinds for exports.

The country’s exports in October Contracted unexpectedlyCustoms data released Thursday showed shipments to the United States posted a double-digit decline for the seventh straight month, down 25%.

In the future, export headwinds may weaken as US President Donald Trump and his Chinese counterpart Xi Jinping, They agreed to a trade truce during their meeting in South Korea on October 30, defusing a potentially dramatic situation that had raised fears of an all-out trade war.

China’s leadership last month He pledged to boost domestic consumption It also laid out the economic road map for the next five years. China should “vigorously boost consumption,” readouts from the meeting, according to a CNBC translation, said.

The leaders spoke in detail about the need to raise consumption and called for balancing it with “effective investment” and “commitment to the strategic point of expanding domestic demand.”

— CNBC’s Annick Pao and Evelyn Cheng contributed to this report.