Core prices—excluding food and energy—were not disclosed in the NBS release, but economists closely tracking China’s inflation trajectory argue that persistent softness in household spending keeps underlying price pressures subdued. Nevertheless, the positive CPI print breaks a run of negative or flat readings that had fueled concerns about deflation taking hold across the world’s second-largest economy.
Producer prices displayed a similar pattern of gradual improvement. The Producer Price Index (PPI) fell 2.1% year on year, slightly better than the 2.2% decline forecast in a Reuters poll. Although October marks the 36th consecutive month of negative factory-gate prices, the drop was the narrowest since April. Month on month, producer prices edged up 0.1%, aided by marginal rebounds in some raw material costs.
In a statement accompanying the figures, the NBS attributed the firmer readings to policy measures aimed at stimulating consumption and to seasonal demand linked to the early-October holidays. The agency said the government’s recent steps to curb excessive price competition—particularly among e-commerce platforms—and bolster financing for manufacturers had started to filter through to retail and wholesale prices.
Still, broader indicators point to lingering weakness in industrial activity. An official purchasing managers’ survey released on Oct. 30 showed manufacturing activity contracting to a six-month low. Sub-indexes tracking production, new orders, raw material inventories and employment all moved deeper into negative territory, underscoring pressure on factories amid slack domestic demand and external uncertainty.
Export performance has also been under strain. Customs data for October revealed an unexpected year-on-year drop in outbound shipments, with sales to the United States sliding 25% for a seventh straight month of double-digit declines. The slump reflects both softer U.S. demand and ongoing frictions over technology and trade rules, despite a wider global recovery highlighted by multilateral institutions.
Trade tensions eased slightly after U.S. President Donald Trump and Chinese President Xi Jinping agreed on Oct. 30 to halt new tariff actions, but analysts caution that prior duties remain in place and that companies continue to re-route supply chains. At the same time, a multi-year property downturn at home has weighed on construction-related sectors, limiting an important source of orders for heavy industry.
Some relief has emerged on the profit front. Industrial profits rose more than 21% in September, helped by lower input costs and targeted fiscal support. However, economists warn that local governments, which rely heavily on value-added and income tax receipts from factories, often encourage firms to maintain high output levels, contributing to excess capacity and continued price competition. Without broader tax reform, the overcapacity cycle could prolong downward pressure on producer prices.
Looking ahead, Beijing’s top leadership has pledged to “vigorously boost consumption” while balancing it with “effective investment.” The policy roadmap, laid out during a high-level meeting last month, calls for expanding domestic demand through measures such as improving household incomes, enhancing social safety nets and supporting service-sector growth. The authorities have also signaled willingness to deploy additional monetary and fiscal tools if needed to anchor inflation expectations near target levels.
Market participants will monitor whether the modest uptick in October’s CPI can be sustained in the final months of the year. Many economists expect headline consumer inflation to remain low but positive, while factory-gate prices could continue narrowing their declines if commodity markets stabilize and export orders recover.
Crédito da imagem: Visual China Group via Getty Images
