China’s consumer prices return to growth as deflationary pressures persist

China’s consumer prices returned to growth in October – though the near-zero figure still pointed to persistent deflationary pressures amid weak domestic demand and trade uncertainties – while factory-gate prices continued to fall.

The national consumer price index (CPI), a key gauge of inflation, rose 0.2 per cent year on year last month, according to data released by the National Bureau of Statistics on Sunday.

The reading beat market expectations after a poll by financial provider Wind forecast a 0.04 per cent drop. In September, the CPI was down 0.3 per cent year on year.

“Policies that aim at boosting domestic consumption showed an effect in October, in addition to the long holidays of National Day and Mid-Autumn Festival that helped drive demand,” said Dong Lijuan, a senior statistician at the bureau.

Premier Li Qiang has called for more efforts to unleash potential consumption by removing restrictions on spending and accelerating the development of new growth drivers such as service industries and new forms of consumption at a meeting of the State Council, China’s cabinet, in August.

The world’s second-largest economy is striving to meet its annual growth targets despite facing growing headwinds in the second half of the year.

“CPI inflation rose in October. It is a surprise to the market,” said Zhang Zhiwei, chief economist at Pinpoint Asset Management in Hong Kong, noting that “it is too early to conclude the deflation is over”.