The National Bureau of Statistics (NBS) has reported today that the consumer price index (CPI) in China has overturned two consecutive months of decline with an unexpected 0.2% increase in October, aligning with most analysts’ expectations.
In six out of eleven months this year, China’s CPI recorded negative figures, with the highest increase previously seen in January at +0.5%, just before the year’s sharpest drop of -0.7% in February.
The threat of deflation has loomed over the Chinese economy for two years, sparked by a significant real estate crisis that has hampered investment and consumption as the country prepares to enter the new lunar year.
Deflation is characterized by a general decline in prices over time, contrary to inflation. This phenomenon indicates weak domestic consumption and investment and poses particular dangers, as falling asset prices could lead to a discrepancy between loan values and bank guarantees.
It can also cause a delay in consumption and investment decisions due to expectations of further price drops, potentially triggering a downward spiral in prices and demand that is challenging to reverse, affecting the entire economy.
Despite the increase compared to November 2024, the monthly variation was negative, with a 0.1% drop, contradicting analyst forecasts that anticipated a repeat of October’s 0.2% rise.
Official Dong Lijuan attributed the year-on-year growth to a rise in food prices, which went from a 2.9% drop in October to a 0.2% increase in November. Notably, fresh vegetables surged 14.5% following a 7.3% decrease in the previous month, reversing a nine-month decline trend.
Core inflation, which excludes energy and food prices due to their volatility, remained stable, with a year-on-year increase of 1.2%.
Regarding the monthly price drop, Dong cited the end of the “Golden Week”—a National Day holiday period starting October 1—as causing a seasonal decrease in service prices.
The NBS also released the Producer Price Index (PPI), which measures factory-gate prices. Following four months of slowing declines, the indicator continued its negative trend in November, with a year-on-year drop of 2.2%.
This decrease was 0.1% more than that recorded in October and fell short of analysts’ expectations for a milder 2% contraction.
Dong explained this deceleration is due to a high base from the same period last year, although he noted that the monthly figure turned positive once again, with industrial prices rising for the second consecutive month (+0.1%), driven by seasonal demand for coal and natural gas and increasing international prices of non-ferrous metals.
