October 2024 CPI rose 0.3% year-on-year, down from 0.4% in September, and below economists' median expectations of 0.4%:
- Shows continued weak consumer demand and keeps deflation concerns active. China faced deflation for four months at the end of 2023.
On the PPI:
- Factory-gate prices -2.9% in October, falling from September's -2.8% and much worse than economists' median expectations of -2.5%
- the deflationary trend in wholesale prices has continued since late 2022
Government Response:
- Lawmakers announced a plan to address local government debt on Friday: China's top lawmakers approve plan to swap local government debt
- Markets were not pleased (as usual): Chinese yuan falls as NPC announcement lacks oomph so far
- More broadly: The optimism in the Chinese market yesterday was baffling
- Earlier measures in September included:
- Interest rate cuts
- Relaxed home purchasing restrictions
- Premier Li Qiang expressed confidence in meeting 5% growth target for 2024
The background to all this are the economic challenges the country faces:
- Property crisis persisting, and persisting. This is impacting consumer confidence
- Slowest economic expansion in 18 months during Q3
- Potential future concerns about U.S. tariffs under incoming Trump presidency
- There are suggestions, which seem well-founded, that there is need for more consumer-focused stimulus measures. Both to boost domestic demand and avoid adding to industry overcapacity pressure, which is contributing to deflation pressure
