China's consumer prices fall in October

Consumer prices in China fell in October for the first time since July on an annual basis, while the central bank is expected to increase easing steps. Deflation has returned in China, which is struggling to revive its economy. Consumer prices in the country fell 0.2 percent annually in October. A Bloomberg survey had estimated a 0.1 percent decline in the consumer price index (CPI). The CPI remained unchanged in September. The 2.5 percent annual decline in producer prices announced in September also deepened, rising to 2.6 percent. In China, where consumer prices have been stubbornly weak this year, the CPI fell 0.3 percent in July and has been on the verge of negative territory since then. Although the People's Bank of China (PBOC) predicted in August that prices would recover from the difficult summer months, recent data suggest that this assessment is overly optimistic. “Fighting persistent disinflation amid weak demand remains a challenge for Chinese policymakers,” said Bruce Pang, chief China economist at Jones Lang LaSalle. “The economy needs an appropriate policy mix and more supportive measures to prevent a downward move in inflation expectations that could threaten business confidence and household spending.” According to Bloomberg Economist David Qu, today’s data will also force the People’s Bank of China to ease policy further. “We think the PBOC will cut one-year interest rates by 10 basis points next week and the reserve requirement ratio by 25 basis points by year-end,” Qu said.