China’s Consumer Prices Return to Growth in October, Easing Deflation Concerns

China’s consumer price index (CPI) rose 0.2% in October, marking the first positive growth in consumer prices since June and signaling a potential easing of deflationary pressures that have weighed on the world’s second-largest economy.

Data released Sunday by the National Bureau of Statistics showed the October CPI reading exceeded analyst expectations of flat growth. While food prices continued to decline – dropping 2.9% year-on-year – they saw a 0.2% increase compared to the previous month. Factory-gate deflation also moderated, with prices falling 2.1% year-on-year, a smaller decrease than the 2.2% decline predicted by Reuters. This shift is significant as persistent deflation can discourage investment and consumption.

“In October, policies aimed at expanding domestic demand continued to take effect, coupled with the boost from the National Day and Mid-Autumn Festival holidays,” stated Dong Lijuan, chief statistician at the urban division of the National Bureau of Statistics. Despite these positive signs, China’s manufacturing activity declined in October, contracting to its lowest level in six months, according to official surveys. The International Monetary Fund has been closely monitoring China’s economic recovery. Exports also unexpectedly contracted in October, with shipments to the U.S. down 25%.

A recent trade truce agreed upon between President Donald Trump and his Chinese counterpart, Xi Jinping, during their meeting in South Korea on October 30th, may help alleviate some export headwinds. Chinese leadership has vowed to boost domestic consumption as part of its five-year economic roadmap, recognizing the need to balance consumption with investment for sustained growth. Officials indicated they will continue to monitor economic indicators and adjust policies as needed.