China’s Deflation Woes Worsen On Weak Consumer Prices

China’s deflationary issues became more entrenched in September, with consumer prices remaining weak and factory gate prices continuing to fall, Bloomberg News reported.

China is facing its longest period of deflation since the 1990s, with a broad measure of economy-wide prices falling for five consecutive quarters through June.

The consumer price index rose by just 0.4% from the previous year, boosted above zero primarily by a surge in fresh vegetable prices.

Core CPI rose 0.1% in September, the lowest since February 2021, while producer inflation fell for the 24th consecutive month, according to data from the National Bureau of Statistics.

Producer inflation dropped 2.8% year-over-year, slightly more than the 2.6% decline economists had forecast.

Overall food inflation climbed 3.3% in September compared to a year ago, while the cost of fresh vegetables surged 22.9% after a 21.8% increase in August, boosting inflation by 0.48 percentage points.

Adverse weather and seasonal demand ahead of a weeklong holiday in China likely pushed up prices for fruits and vegetables.

The figures highlight the weakness in domestic demand before policymakers introduced a range of stimulus measures in late September to revive the economy.

China is facing its longest period of deflation since the 1990s, with a broad measure of economy-wide prices falling for five consecutive quarters through June—a trend that likely continued through September.

Beijing has cut interest rates and ramped up support for the property and stock markets since late September. On Saturday, the Finance Ministry promised additional aid for the slumping property sector and indebted local governments.