Chinese officials are under mounting pressure to stimulate the economy after official price data released Sunday stoked fresh deflation fears.
The consumer price index (CPI) rose 0.4% year-on-year in September, as bad weather pushed up food prices ahead of the Golden Week holiday. That was below the consensus estimate of 0.6%, which would have matched the rate of price growth in August.
The producer price index (PPI) fell 2.8% compared to September last year — the sharpest drop in six months and up from 1.8% in August.
Prices have stagnated due to a slew of economic headwinds that are weighing on domestic demand:
Even with those drags, Goldman Sachs has raised its GDP growth forecast for China from 4.7% to 4.9% this year — just shy of the government’s 5% target — and from 4.3% to 4.7% next year, Bloomberg reported.
The investment bank’s analysts cited the government’s planned stimulus package, which has somewhat revitalized Chinese stock markets despite officials offering limited details.
China’s leader, Xi Jinping, may be wary of overstimulating the economy as aggressive government support was a key contributor to the property bubble.
“China didn’t pull out the fiscal bazooka” at a press conference on Saturday, Ipek Ozkardeskaya, a senior analyst at Swissquote Bank, said in a morning note.
“Xi doesn’t like market euphoria and investors don’t like the fact that the ample monetary stimulus may not be channeled toward the right places in the absence of an efficient and comprehensive fiscal package. But both agree that China needs stimulus to overcome the deepening property crisis and fight deflation.”
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