China can’t shake deflation

livemint.com:

SINGAPORE : Consumer prices in China fell for the second straight month, a deepening bout of deflation that shows Beijing’s efforts to reignite faltering growth are falling short. China’s top leaders telegraphed Friday that more support is coming for the economy, with pledges of new fiscal stimulus and supportive central-bank policy in the months ahead. Still, the Communist Party’s ruling Politburo signaled that stimulus will be measured rather than aggressive, reinforcing expectations for steady if unspectacular growth in 2024 as the economy grapples with a drawn-out property bust and a global backdrop darkened by war and slowdowns in the U.S.

and Europe. Consumer prices in China tumbled 0.5% in November compared with a year earlier, China’s National Bureau of Statistics said Saturday, steeper than October’s 0.2% fall. Prices charged by companies at the factory gate also fell in November at a steeper annual rate than in October, as firms slashed prices in an effort to beef up sales.

The weak inflation figures add to a run of signals suggesting that China’s economy is losing momentum again after modest interest-rate cuts and other small stimulus steps drove a pickup in growth in the third quarter. Exports rose by only 0.5% in November after several months of decline, while surveys pointed to a contraction in activity at factories and in services. New home sales continued to drop in October.

The data point to a weak close to the year, economists say. China’s economy had been expected to grow strongly in 2023 as the dismantling of Beijing’s draconian Covid-19 controls powered a potent consumer-led rebound. Instead, consumers mostly socked away savings as a deep property slump dragged on.