[News] China’s Deflation Intensifies, and Weak Exports Further Weigh on Economic Growth

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China’s CPI showed a slowdown in September, according to data released by China’s National Bureau of Statistics on October 13. The Consumer Price Index (CPI) rose 0.4% year-over-year, below both the previous month and the market expectation of 0.6%.

Breaking down the details, food prices increased by 3.3% year-over-year, up 0.5 percentage points from the previous month, contributing 0.66 percentage points to the overall CPI growth. However, non-food prices shifted from a 0.2% year-over-year increase to a 0.2% decline. Energy prices dropped by 3.5% (previously -2.0%), while service prices rose by 0.2% (previously 0.5%), reflecting lower energy prices due to base effects and reduced demand for accommodation services following the summer season.

 

Overall, domestic demand in China remains weak. Excluding food and energy, core CPI grew by only 0.1% year-over-year, down 0.2 percentage points from the previous month. Additionally, the Producer Price Index (PPI) fell by 2.8% year-over-year in September, a wider decline than the previous month’s 1 percentage point drop, indicating rising deflationary pressures.

 

On the same day, China’s General Administration of Customs released September trade data. Exports grew 2.4% year-over-year, down from 8.7% in the previous month and below market expectations of 6%. Imports rose by 0.3%, lower than both the previous month’s 0.5% growth and the market forecast of 0.9%, continuing to reflect weak domestic demand and increased trade barriers from other countries.

While China announced large-scale monetary easing policies in mid-September, specific implementation plans for accompanying fiscal measures have yet to be unveiled. Given the persistent weakness in demand and challenges to future export growth, China faces significant difficulty in achieving its 5% GDP growth target for the year.