In October, China experienced a reversion to deflation, as indicated by official data, with a decrease in pork prices impacting the nation’s economy, which is the second-largest globally.
The National Bureau of Statistics (NBS) reported that the consumer price index, a key inflation measure, dropped by 0.2 percent from the previous year for the same month.
This deflationary shift was double what economists had projected and signified a regression after slight recoveries in September and August from a 0.3 percent fall in July.
The most significant price drops were seen in food, tobacco, and alcohol in October, with pork prices notably falling by 30.1 percent, as per the NBS.
Dong Lijuan, an NBS official, attributed the decline to reduced consumer demand post the mid-autumn festival and a surplus in agricultural product supplies, among other reasons.
Deflation, while indicating lower prices, poses a risk to the economic health as it may lead consumers to delay purchases in anticipation of further price drops.
This reduction in demand can prompt businesses to scale back production, halt hiring or initiate layoffs, and offer additional discounts to clear inventory, which can erode profits while costs stay unchanged.
China’s producer prices have continued to decline for the thirteenth consecutive month, echoing a familiar narrative of deflation driven by plummeting pork prices.
The country went through a brief phase of deflation at the close of 2020 and the onset of 2021, primarily due to a significant drop in pork prices, which is the country’s staple meat. The previous instance of deflation was recorded in 2009.
The National Bureau of Statistics (NBS) noted that producer prices fell by 2.6 percent, a slight deviation from the 2.7 percent drop anticipated by economists, indicating potential further economic softness.
Zhiwei Zhang, the chief economist at Pinpoint Asset Management, interpreted the data as a sign of persistently weak domestic demand.
