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China's consumer prices fall fastest in 3 years, factory-gate deflation deepens

Published Dec 08, 2023 09:10PM ET Updated Dec 09, 2023 03:16AM ET
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© Reuters. FILE PHOTO: People walk along Nanjing Pedestrian Road, a main shopping area, ahead of the National Day holiday, in Shanghai, China September 26, 2023. REUTERS/Aly Song/File Photo
 
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BEIJING (Reuters) -China's consumer prices fell the fastest in three years in November while factory-gate deflation deepened, indicating rising deflationary pressures as weak domestic demand casts doubt over the economic recovery.

The consumer price index (CPI) dropped 0.5% both from a year earlier and compared with October, data from the National Bureau of Statistics (NBS) showed on Saturday.

That was deeper than the median forecasts in a Reuters poll of 0.1% declines both year-on-year and month-on-month. The year-on-year CPI decline was the steepest since November 2020.

The numbers add to recent mixed trade data and manufacturing surveys that have kept alive calls for further policy support to shore up growth.

Xu Tianchen, senior economist at the Economist Intelligence Unit, said the data would be alarming for policymakers and cited three main factors behind it: falling global energy prices, the fading of the winter travel boom and a chronic supply glut.

"Downward pressure will continue to rise in 2024 as developers and local governments continue to deleverage and as global growth is expected to slow," Xu said.

Year-on-year core inflation, excluding food and fuel prices, was 0.6%, the same as October.

Bruce Pang, chief economist at Jones Lang Lasalle (NYSE:JLL), said the weak core CPI reading was a warning about persistently sluggish demand, which should be a policy priority for China if it is to deliver more sustainable and balanced growth.

Although consumer prices in the world's second-biggest economy have been teetering on the edge of deflation in recent months, China's central bank Governor Pan Gongsheng said last week inflation was expected to be "going upwards".

The producer price index (PPI) fell 3.0% year-on-year against a 2.6% drop in October, marking the 14th straight month of decline and the quickest since August. Economists had predicted a 2.8% fall in November.

China's economy has grappled with multiple headwinds this year, including mounting local government debt, an ailing housing market and tepid demand at home and abroad. Chinese consumers especially have been tightening their purse strings, wary of uncertainties in the elusive economic recovery.

Moody's (NYSE:MCO) on Tuesday issued a downgrade warning on China's credit rating, saying costs to bail out local governments and state firms and to control the property crisis would weigh on the economy.

China's finance ministry called the decision disappointing, saying the economy would rebound and risks were controllable.

The authorities will spur domestic demand and enhance economic recovery in 2024, the Politburo, a top decision-making body of the ruling Communist Party, was quoted by state media as saying on Friday.

Markets are awaiting more government stimulus at the annual agenda-setting "Central Economic Work Conference" later this month.

China's consumer prices fall fastest in 3 years, factory-gate deflation deepens
 

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Comments (4)
László Tuba
László Tuba Dec 09, 2023 8:05AM ET
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it would be a huge buying opportunities :) ! i've started to pick up the chinese assets via my first of the packages of chinese stocks etf.
Dec 09, 2023 6:20AM ET
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kamalhusseinMajala
Ernie Keebler
Ernie Keebler Dec 09, 2023 5:35AM ET
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With insolvency in much of Chinese real estate companies, $Trillions spent in Europe and the US just to keep the bubbles inflated a little longer with most if not all personal savings wasted on chasing higher unwarranted stock valuations that have one by one been dropping and replaced in the indexes to keep the averages up. Many companies cutting costs by reducing labor pool in the short run boosts their bottom lines and people mistakenly buying their stock thinking that's long term positive. Really think that spells soft landing?
Atlantic Coast Money
Atlantic Coast Money Dec 09, 2023 4:45AM ET
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Seems interest rate hikes in US were effective in dampening inflation. China was price gouging on exported goods and the Federal Reserve was tired of it. Raising interest rates drastically slowed demand for their goods. Sustained deflation in the US should follow. Great news. Soft landing may actually be achieved.
Paul Browning
Paul Browning Dec 09, 2023 4:45AM ET
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Deflation is our real concern. We've headed for a catastrophic crash and depression.
 
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