What’s going on?
Fresh data out on Friday showed that China’s inflation was pretty gentle in September.
What does this mean?
Western countries may well be looking eastward with envy right now, comparing their own whirlwind price increases to China’s softer inflationary breeze. You can’t blame them: consumer prices in the world’s second-biggest economy were up just 2.8% in September compared to the same time last year. Granted, that’s the biggest increase since April 2020, but it’s still below economists’ expectations – and a damn sight better than the US’s 8.2%. China’s milder inflation was primarily driven by food prices, propelled by a shortage of pork (a food staple in the country) and temperatures that didn’t suit finicky fruit and veg. So when you really get down to brass tacks, month-on-month core inflation – which strips out volatile prices like food and energy – actually slowed to a mere 0.6%, the weakest it’s been since March 2021.
Why should I care?
Zooming in: China’s inflation is so 2022.
Forget inflation, some analysts reckon that China could be poised for a price-dropping “era of deflation”, with demand on pretty shaky legs at the minute. The main culprit seems to be its floundering property market, which makes up a third of the country’s entire economy: it saw its twelfth-straight month of declining house prices in August – an anniversary that no one wants to celebrate. No wonder, then, that economists expect the government to announce a slew of new support measures.
The bigger picture: Good news, gang.
Those deflation predictions might be bad news for China, but it could be just what the rest of the world needs. China’s the world’s biggest exporter, so any drop in its prices would mean other countries cough up less on imports. With a little luck, that could help take inflation off the boil across the globe.
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Originally Posted October 14, 2022 – China Floats While The World’s Flailing
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