China’s deflation pressures eased slightly in September, though price declines remain entrenched, leaving the economy on course for its longest deflationary stretch since market reforms began in the late 1970s.
Official data showed factory-gate prices (PPI) fell 2.3% year-on-year
- marking a 36th consecutive monthly decline
- broadly in line with forecasts
Consumer prices (CPI) dropped 0.3%,
- weaker than expectations for a 0.2% fall,
Core CPI, which strips out food and energy, rose to a 19-month high of 1%, suggesting tentative stabilization in some industrial sectors like coal mining and solar equipment, according to the National Bureau of Statistics.
Deflation has persisted since the pandemic, worsened by a property slump, weak consumer confidence, and industrial overcapacity, which has pushed companies into price wars. Despite policy efforts to curb excess competition and stabilise prices, China’s GDP deflator—the broadest gauge of economy-wide prices—has been negative for more than two years, the longest such run since records began in 1992.
Beijing has lowered its official 2025 inflation target to around 2%, the lowest in over two decades. Inflation, however, remains near zero, reflecting deep structural imbalances. Analysts expect upcoming Q3 economic activity data (due October 20) to show growth slowing from the first half, though China remains likely to meet its 5% full-year target, reducing the likelihood of new large-scale stimulus when the Communist Party meets later this month.
