China slipped back into deflation in October, according to official statistics released Thursday, as the government struggles to revive the world’s second-largest economy struggling with sluggish consumption. Last month’s consumer price index, the main indicator of inflation, fell 0.2 percent year on year, contracting for the second time this year, according to the State Statistics Bureau. This index had already contracted 0.3% year-on-year in July, before returning to green in August and September. The contraction is related to lower consumer demand after the mid-autumn holiday period and other factors, such as high supply of agricultural products, Dong Lijuan, a statistician with the statistics bureau, said in a news release Thursday. .
Unlike inflation, deflation is characterized by a long-lasting and self-sustaining decline in the general level of goods and services. Although cheaper products may seem beneficial for purchasing power, lower prices can pose a threat to the economy, as consumers tend to postpone purchases in the hope of obtaining greater discounts. Low demand can then force companies to reduce production, freeze hiring or layoffs, and accept further reductions to sell their inventory, hampering profitability even if costs remain the same.
Probable improvement in demand in 2024
Prices of food, tobacco and alcohol recorded the biggest drops in October; In particular, the price of pork fell 30.1% year-on-year. China experienced a brief period of deflation in late 2020 and early 2021, largely due to the collapse in the price of pork, the most consumed meat in the country. Before, the last deflationary period dates back to 2009. For Zhiwei Zhang, chief economist at Pinpoint Asset Management, these data show that “domestic demand remains weak.” But he sees signs of greater support from Beijing for its economy.
Source: BFM TV
