China: Fall in consumer prices softens in September
Latest reading: Consumer prices declined 0.3% on a year-on-year basis in September, following a 0.4% fall in the prior month. September’s decline was sharper than markets had expected, and means that prices have now fallen for six of the first nine months of the year. Soft consumer demand, vast manufacturing capacity, cutthroat competition in key sectors and ample pork supply all put downward pressure on prices in September.
Finally, consumer prices were up 0.10% in September in month-on-month terms, following a flat reading in the previous month.
Panelist insight: On the price outlook, Nomura analysts said:
“We continue to believe the anti-involution campaign alone may not successfully reflate the economy for several reasons. First, the economy will likely face multiple demand shocks in coming months, despite the stock market rally. Second, cuts in investment and output in some sectors might dent demand, and we do not expect mega stimulus programs on par with the shantytown renovation program, which was implemented during a similar campaign in 2015-18. Third, the ongoing trade-in program has elicited fierce price cuts. Fourth, local governments’ excessive investment in the manufacturing sector may not be truly contained. Fifth, the recent stock market boom may provide new funding to corporations in sectors with overcapacity.”