Concerns rise about deflation in China

The current decline in producer prices and stagnation in consumer prices in China have raised concerns about the risk of deflation.

China’s National Bureau of Statistics (UIB) announced price increase data for the period September 2023. In September, the Producer Price Index (PPI) decreased by 2.5 percent compared to the same period of the year past. The Consumer Price Index (CPI) remained stable.

CONCERNS ARE INCREASING

While the downward trend in producer prices in the country continues for 12 months, the fact that consumer prices remain stable indicates the risk of deflation. Concerns have increased about the risk of deflation in the medium and long term.

The decline recorded in the last quarter of 2022 by the IPP, calculated from the ex-factory prices of manufacturing products, continued in the 9 months of the year. Analysts attribute the drop in producer prices to weak foreign demand. In China, whose manufacturing sector is export-based, exports fell 6.2 percent year-on-year in September.

CONSUMER PRICES ARE STABLE

Although the CPI, which is considered the main indicator of inflation, rose 0.1 percent in September compared to the previous month, it did not increase or decrease annually. Consumer prices, which remained stagnant, rose only 0.4 percent in nine months compared with the same period last year.

While food prices decreased by 3.2 percent in September, service prices increased by 1.3 percent. Core inflation, which excludes food and energy prices, rose 0.8 percent. It is observed that price increases in the country remain behind the 3 percent inflation goal that the government has planned for this year. (AA)