China’s deflationary pressures seem not to be fading, underscoring the fragility of the economic recovery as 2023 draws to a close.
Economic data due to be released on Thursday is likely to show China’s CPI slumped again in October, according to economists polled by Bloomberg.
The PPI may also fall for the 13th consecutive month.
“Consumer costs have been consistently weak during the year, with the consumer price index falling to a downturn in July, and since then it has been teetering on the brink of negative growth on a negative basis,” according to Bloomberg.
The People’s Bank of China announced in August that prices would rebound from a sharp fall in the summer, but a further decline could prove that this valuation was too optimistic.
Long Battle
Morgan Stanley believes that China could face a long battle against falling prices in the coming years, recently saying Beijing is “at the initial stage of the downturn battle” as it shifts away from its “excessive, credit-backed growth model.”
Weak inflation figures could boost uncertainty in the country’s growth outlook, following an unexpected contraction in factory activity and slowing growth in the service sector during October.
“China’s consumer demand remains weak. The country’s broadest price measure, the GDP contraction factor, is likely to be negative in the last three months of the year,” Larry Ho, Head of China’s Economy at Macquarie Group, said.
Bloomberg’s estimate, based on official data, indicates that this measure has already decreased for two consecutive forty years, for the first time since 2015.