China consumer prices rise slowest in 4 months, despite stimulus

China’s consumer prices rose at the slowest pace in four months in October while producer price deflation deepened, data showed on Saturday, even as Beijing doubled down on stimulus to support the sputtering economy.

In its latest stimulus measures, the country’s top legislative body approved a 10 trillion yuan ($1.4 trillion) package on Friday to ease local government “hidden debt” burdens, rather than directly injecting money into the world’s second-biggest economy, as some investors had hoped.

Analysts say the package will likely do little to boost economic activity, demand and prices in the near term.

The consumer price index (CPI) rose 0.3% from a year earlier last month, slowing from September’s 0.4% rise and marking the lowest since June, data from the National Bureau of Statistics showed, short of the 0.4% increase forecast in a Reuters poll of economists.

However, core inflation, excluding volatile food and fuel prices, rose 0.2% in October, accelerating from 0.1% in September.

“Due to the Golden Week holiday in October, the effect of stimulus policies on promoting domestic demand issued since late September is not obvious yet,” said Bruce Pang, chief economist at JLL.

He expected CPI to maintain an upward trend while core inflation remains mild, opening up space for the authorities to cut interest rates further early next year.

China’s central bank in late September unveiled the most aggressive monetary support measures since the COVID-19 pandemic to revive economic growth.

The highly anticipated stimulus plan passed on Friday by the standing committee of the National People’s Congress may leave investors who speculated on a fiscal bazooka disappointed, as it fell short of expectations for strong policy steps to boost consumption and reflate the economy.

Finance Minister Lan Foan indicated on Friday that more stimulus was coming, telling a press conference that tax policies to support the housing market would come soon and that the authorities were accelerating the work of recapitalizing banks.

Some analysts say Beijing may want to retain some economic ammunition until Donald Trump resumes the U.S. presidency in January.

On a month-on-month basis, China’s CPI dropped 0.3%, versus an unchanged outcome in September and below a forecast 0.1% decline.

Declining food prices dragged down the month-on-month CPI, Dong Lijuan of the statistics bureau said in a statement.

With 70% of Chinese household wealth tied up in the ailing real estate sector, which at its peak made up a quarter of the economy, consumers are holding onto their money tightly, subjecting the economy to deflationary pressures.

China’s headline consumer inflation will likely remain low next year at 0.8%, while producer prices will not turn positive until the third quarter of 2025, Goldman Sachs said in a note this month.

Producer prices slid 2.9% on year in October, deeper than the 2.8% fall the previous month and below an expected 2.5% decline. It marked the biggest drop in 11 months.

Factory-gate deflation deepened in the petroleum and natural gas extraction, oil and coal processing, chemical products manufacturing and auto manufacturing sectors.

“The implementation of some better-than-expected counter-cyclical adjustment policies is expected to improve consumption and investment momentum,” said Zhou Maohua, a macroeconomic researcher at China Everbright Bank.

“But a recovery in the domestic housing market, household consumption and a balance of supply and demand would require some time.”