(Bloomberg) — China’s consumer price index rose less than expected in September, while factory admission prices fell for the 24th consecutive month, highlighting the need for further policy support to help the economy overcome deflation. It became a relief.
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The consumer price index rose 0.4% from a year earlier, but was lower than the median estimate of 0.6% in a Bloomberg survey of economists. Producer inflation fell by 2.8%, the second consecutive year of decline. Economists had expected a decline of 2.6%.
Core CPI, which excludes volatile food and fuel prices, rose 0.1%, according to data released by the Office for National Statistics on Sunday.
The figures underscore the weakness in domestic demand before policymakers unleashed a series of stimulus measures to revive the economy in late September. China is facing its longest period of deflation since the 1990s, with economy-wide prices falling for five consecutive quarters through June, a trend likely to continue into September.
Since late September, the Chinese government has lowered interest rates and increased support for the real estate and stock markets. The Treasury on Saturday promised further support for the ailing real estate sector and debt-laden local authorities.
“Overall inflation remains well below policy target and demand remains weak,” said Bruce Pang, chief economist for Greater China at Jones Lang LaSalle. It is expected that as market demand gradually recovers, the confidence and expectations of consumers and producers will be effectively increased. ”
Overall food inflation rose 3.3% year-on-year in September, while fresh vegetable prices rose 22.9% after rising 21.8% in August. Prices for fruits and vegetables are likely to rise in China due to bad weather and seasonal demand ahead of a week-long holiday.
Sluggish consumption and rapid increases in production have led to intense price competition in areas such as electric vehicles and solar power generation. Prices of so-called transportation vehicles, including cars, fell by 5.3%, and sales prices of automakers fell by 2.3%.
Falling prices are a bad sign for the economy. Deflation can suppress spending and investment, leading to a vicious cycle that slows economic growth and increases unemployment.
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–With assistance from Tian Ying and Fran Wang.
(Adds economist’s comment in 6th paragraph)
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