China inflation: October’s consumer, factory-gate price drops do not portend ‘deflationary spiral’, analysts say
- China’s consumer price index (CPI) fell by 0.2 per cent from a year earlier in October, while the producer price index (PPI) fell for the 13th month in a row
- A deepening of food-price deflation was deemed the ‘main culprit’ behind a decline in the consumer price index last month
In the latest sign of China’s unstable recovery and weak domestic demand, consumer prices fell again in October and factory-gate prices contracted further.
But while some analysts contend that China is not trapped in a cycle of deflation, they continue to call for further policy support to stem the downward risks in the overall economy.
The “main culprit” for the fall was a deepening of food-price deflation, said analysts at Capital Economics, as overall food prices dropped by 4 per cent last month, year on year, with the negative pork-price-inflation reading deepening to minus 30.1 per cent in October compared with a year earlier.
“What China has right now is a low rate of underlying inflation, which reflects the fact that domestic demand is fairly weak,” said Robert Carnell, regional head of research, for Asia-Pacific at ING.