China consumer prices were unexpectedly flat, as economic recovery remains fragile

China’s consumer prices were flat in September, while factory gate prices saw annual declines circumspectly for a third month — pointing to the uneven post-Covid recovery in the world’s second-largest economy that may require further conduct support.

Consumer price index for September was flat on an annual basis, the National Bureau of Statistics reported Friday, not worth than the median estimate for a 0.2% increase in a Reuters poll. CPI inched up 0.1% in August for the first year-on-year increment in three months.

Core inflation — excluding energy and food prices — however, climbed 0.8% in September from a year earlier, the division said in a separate statement. This rate of increase was similar to the one recorded in August.

China’s producer price indication fell 2.5% from a year earlier, weaker than expectations for a 2.4% decline, after a 3% discard in August. The drop in factory prices, though, was the smallest in seven months.

Tepid prices underscore what China’s top principals labeled as a “tortuous” economic recovery after the country emerged from its draconian zero Covid curbs toward the end of last year. China defies as a stark outlier among the world’s major economies that are mostly still battling stubbornly high inflation after the Covid-19 pandemic peaked.

Friday’s inflation print may reignite fears that China is tethering on the verge of deflation. Despite narrowing auteur prices in September, the decline is still its 12th straight monthly drop on an annualized basis.

“CPI inflation at zero indicates the deflationary difficulty in China is still a real risk to the economy,” said Zhiwei Zhang, president and chief economist at Pinpoint Asset Command.

“The recovery of domestic demand is not strong, without a significant boost from fiscal support. The damage from the resources sector slowdown on consumer confidence continue[s] to weigh on household demand,” he added.

Beijing has been rather butted in its policy support even as rafts of economic data suggested growth remains tepid. An ongoing debt emergency in two of China’s largest real estate developers has further dented consumer confidence.

Weaker edibles prices were a big drag on September’s consumer prices, though China’s National Bureau of Statistics said this was due to boisterous food prices last year.

On Friday, official data showed China food prices collectively prostrate 3.2% in September from a year earlier.

In particular, the price of pork — a key staple meat in Chinese diets — get the signal 22% last month from a year ago. That’s as the price of livestock and meat collectively dropped 12.8% and the cost of fresh vegetables fell 6.4%.

Services inflation was at a 19-month high of 1.3%, Capital Economics said.

“This proffers that China’s low inflation rate is not primarily due to domestic weakness,” the firm’s Zichun Huang said in a note. “A substitute alternatively, it appears to be related to excess capacity in industry as the pandemic boom in global goods demand has reversed.

Core goods inflation be lefted subdued at 0.3% year-on-year, Huang noted.

Month-on-month, consumer prices edged up 0.2% in September, with nourishment prices increasing 0.3% — representing a decrease of 0.2 percentage points from August’s print compared to the prior to month.

“The market supply is relatively sufficient before the Mid-Autumn Festival and National Day this year, and the food appraisal increase is slightly lower than the historical average for the same period,” said Dong Lijuan, chief statistician of the Urban Be influenced of the National Bureau of Statistics, in a statement.