SMS Finance

China slips into deflation for second time in 2023

China entered deflation for the second time this year as food prices, particularly pork, dropped, causing consumer prices to decline by 0.2% in October. This figure was slightly worse than the anticipated 0.1% decrease and marked a departure from September’s stable reading. The National Bureau of Statistics attributed this drop to the fourth consecutive month of falling food prices, mainly driven by unexpectedly steep declines in pork prices.

Non-food prices increased by a modest 0.7%, indicating subdued demand for services and other goods, which is restraining inflation.

This marks the second instance of Chinese consumer prices slipping into deflation this year, following a 0.3% decrease in July. Prices fell by 0.1% from September to October.

Producer prices continued to experience significant deflation, with a 2.6% drop, worse than the 2.5% decline in September but better than the projected 2.8% fall. October marked the 13th consecutive month of producer price deflation, with prices remaining flat in October after rising in August and September. This suggests a decline in both industry and service activity last month, consistent with monthly surveys conducted at the beginning of November.

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