China's economic data for October 2024 reveals signs of continuing deflationary pressures, with both consumer and producer prices showing weak growth, despite efforts by the Chinese government to stimulate the economy. Here's a breakdown of the key figures that highlight the ongoing slowdown.

1. China’s Inflation Rate Slows to 0.3% in October 2024

China's annual inflation rate for October 2024 stood at just 0.3%, down from 0.4% in September and marking the lowest reading since June. While this represents the ninth consecutive month of consumer inflation, it underscores growing deflation risks amid weak domestic demand.

Key contributors to this inflation slowdown include:

• Non-food Prices: These fell by 0.3% year-on-year in October, an increase from the 0.2% decline seen in September. This decline was largely due to lower costs in transport (-4.8% vs. -4.1%) and housing (-0.1% vs. -0.1%).
• Food Prices: After the sharpest rise in 20 months in September, food inflation moderated to 2.9% in October, from 3.3% in the prior month. Key contributors to this easing included slower price increases in fresh vegetables (21.6% vs 22.9%) and pork (14.2% vs 16.2%).
• Healthcare and Education: While non-food items saw a decline, prices for healthcare (1.1% vs. 1.2%) and education (0.8% vs. 0.6%) showed slight increases.

On a monthly basis, China’s Consumer Price Index (CPI) declined by 0.3%, surpassing market expectations for a 0.1% drop.

2. China’s Producer Prices Continue to Shrink

Producer prices in China showed a significant drop of 2.9% year-on-year in October 2024, marking the 25th consecutive month of contraction. This was worse than the expected 2.5% decline, and the steepest fall since November 2023.

The drop in producer prices can be attributed to:

• Weak Domestic Demand: Despite Beijing's stimulus measures, demand remained sluggish across various sectors, leading to price reductions in production materials, including mining (-5.1% vs. -2.5%) and raw materials (-4.0% vs. -3.2%).
• Consumer Goods: Consumer goods prices fell by 1.6% year-on-year, with food and clothing seeing declines. Durable goods like electronics also saw notable drops (-3.1% vs. -2.1%).

On a monthly basis, producer prices fell by 0.1%, showing a slight improvement over the 0.6% decline in September.

3. Food Prices Continue to Moderate

Food inflation in China, which saw a significant rise earlier in the year, showed signs of cooling in October 2024:

• The overall food price increase slowed to 2.9%, down from 3.3% in September.
• Prices for fresh vegetables and fruit moderated, with fresh vegetable prices rising at a slower pace (21.6% vs. 22.9%) and pork seeing a smaller increase (14.2% vs 16.2%).
• On the flip side, cooking oils, eggs, and milk continued to decline, contributing to the moderation in food price inflation.

Conclusion:

While the Chinese government has implemented stimulus measures to combat the slowing economy, the latest data for October 2024 highlights the persistent deflationary trends in both consumer and producer prices. With a 0.3% CPI rise and a 2.9% drop in producer prices, the economic outlook for China remains fragile, with domestic demand continuing to weaken despite government efforts. Investors and policymakers will need to monitor these trends closely to gauge the effectiveness of stimulus measures and the potential for further economic slowdown.

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