Chinese Consumer Inflation Unchanged, Fueling Worries Of Economic Slowdown

China’s consumer inflation rate in September remained constant from the previous year, while producer prices kept falling. This stagnant inflation rate has intensified concerns about the requirement for additional measures to sustain economic growth.

What Happened: According to Bloomberg, the National Bureau of Statistics of China declared that the consumer price index in September was unchanged compared to a year ago, going against the anticipated slight increase. On the contrary, producer prices experienced a drop of 2.5%, following a 3% decline in August. This pattern of factory-gate deflation has persisted for the last year, though it has been gradually easing in recent times.

The chief statistician of the NBS, Dong Lijuan, attributed the steady consumer prices in September to a high comparison base from the previous year. She noted slower growth in food prices due to an ample supply before the Golden Week holiday.

The stagnation of consumer prices coupled with the continuous fall in producer prices is causing worry amidst ongoing concerns about China’s economy. The current property crisis, weak consumer confidence, and less-than-stellar Golden Week spending are exerting pressure on a variety of sectors, including stocks and commodity prices.

Bloomberg reported earlier this week that the Chinese government is considering increasing its budget deficit for the year to enhance infrastructure spending. The proposed stimulus aims to help the economy achieve its official growth target of approximately 5%.

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Why It Matters: The unchanged consumer inflation rate comes on the heels of China’s struggle with deflation as reopening efforts have been unfruitful. According to a Benzinga report in August 2023, the Chinese National Bureau of Statistics reported that China’s annual consumer price inflation became negative for the first time since February 2021. This trend, coupled with the continuous decrease in producer prices, only intensifies concerns over China’s economic stability and growth prospects.

The International Monetary Fund recently reduced its growth forecast for China from 5.2% to 5% for this year, and from 4.5% to 4.2% for the next year, citing dwindling real estate investment, falling housing prices, and weak consumer sentiment as the main reasons for the slowdown.

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