China’s consumer prices fell in October, adding to concerns about the country’s economic recovery. The consumer price index shrank 0.2% year-on-year, more than the 0.1% decline expected by economists. This comes after a flat reading in September, indicating the need for further policy support.
In addition to the decline in consumer prices, China’s producer price index fell 2.6% last month, marking the 13th consecutive month of decline. This deflationary environment is a sign of sluggish domestic demand, according to Zhiwei Zhang, president and chief economist of Pinpoint Asset Management.
Amidst the economic challenges, China is also facing a debt crisis in its real estate sector, which makes up about 30% of its economy. Beijing has been providing targeted policy support, but the ongoing debt crisis is likely to continue affecting consumer confidence.
Looking ahead, investors are keeping a close eye on the annual Singles Day shopping festival, which ends on November 11, to gauge the strength of Chinese consumption. However, there are concerns that excitement about the shopping festival has waned, with some experts predicting muted sales this year.
“I think this year’s Singles Day sale has not been living up to expectations,” said Hao Hong, partner and chief economist at Grow Investment Group. “Ever since last year, people have stopped spending a lot of money on the Singles Day sale, so it is going to be a muted sales year.”
Despite the current challenges, some analysts are optimistic about the prospects for next year, citing expectations of improved domestic demand as the budget deficit rises and the government potentially provides support to property developers.
Overall, the latest economic data from China points to ongoing struggles with inflation and domestic demand, raising questions about the country’s path to recovery.