China shows increasing signs of deflation as stimulus skepticism grows

Consumer prices in China saw their slowest growth in months in September, according to new Consumer Price Index data showing a 0.4% rise in August, lower than analysts’ expectations. Producer prices also declined compared to the same period last year, raising concerns that deflation could become increasingly entrenched.

While China’s central bank proposed an aggressive intervention program, briefly buoying stock markets, analysts have cautioned that such stimulus measures alone are “never strong enough to reflate the economy.” Many economists expect a fiscal stimulus between 1 trillion and 3 trillion yuan, with some hoping for as much as 10 trillion yuan. Many analysts noted that details on the size of the country’s proposed fiscal stimulus plan were “notably missing” during a Saturday press conference with China’s finance minister on the new data.

Some financial experts believe China “will deliver” on the details when the country’s top legislative committee reconvenes later this month, The Wall Street Journal reported.