Chinese producer prices have 1st drop since late 2020 on weaker demand

China’s producer prices fell in October for the first time since December 2020, while consumer inflation moderated, highlighting the weakness of domestic demand with strict Covid-19 restrictions, property sector losses and the recession. global impact can affect the economy.

Analysts say the problems facing businesses and consumers, both at home and abroad, will add to deflationary pressure on China in the coming months, with aggressive hikes in global interest rates and the Ukraine war adding to the challenge for Beijing.

The Producer Price Index fell 1.3% in October from a year earlier, reversing a 0.9% rise a month earlier, data from the National Bureau of Statistics showed on Wednesday. The expectation in a Reuters poll was a decline of 1.5%.

Consumer inflation also moderated from a 29-month high in September, and underlying price pressures remained much more modest, with core inflation increasing 0.6% in October, the same rate as in September.

“Adverse factors such as weak domestic demand and slowing exports will keep China on the lookout for deflation, signaled by its moderate reading of the core consumer index below 1.5% for more than two years,” said Bruce Pang, an economist. head and head of research at Jones Lang Lasalle Inc.

The deflationary boost in the producer price indicator partly reflected sharply higher levels from a year ago and falling commodity prices, according to an agency statement.

The world’s second-largest economy has been hit this year by a recurrence of Covid-19 outbreaks, prompting authorities to implement strict restrictions against the virus and dealing a blow to factory and consumer activities.

The consumer price index rose 2.1% in October from a year earlier, down from a 29-month high of 2.8% in September, mainly driven by falling food prices. It was also below expectations of 2.4%.

Food prices rose 7.0% year-on-year, decelerating from 8.8% in the previous month.