China’s factory gate prices for October fell for the first time in two years as domestic demand weakened and business disruptions due to strict COVID restrictions and a slump in the property sector.

Reuters cited data from China’s National Bureau of Statistics (NBS), showing that the producer price index (PPI) dropped 1.3% from a year ago, down from a 0.9% increase in September.

The index reflects the product prices that factories charge wholesalers. 

The official data is below Reuters’ poll of a 1.5% contraction.

Experts said that the trend might continue to fall as economists from Capital Economics told the South China Morning Post, “producer price inflation retreated into negative territory for the first time since the end of 2020, and we think it will stay negative through much of 2023.”

Factors contributing to the decrease in the producer price might stem from falling commodity prices and weak demand. 

According to Reuters, prices in the coal mining and washing industry dropped 16.5%, while prices in metal processing plunged 21.1% in October after declining 18.0% in September.

Official data showed on Monday that the country’s exports in October contracted 0.3%, while imports fell 0.7% from a year ago.

It’s the first simultaneous fall in China’s trade since May 2020. 

China’s manufacturing activity also unexpectedly shrank in October as global and domestic demand and stringent COVID-controlled measures hurt production.

According to NBS data released on Monday, October 31, the country’s manufacturing purchasing managers’ index (PMI) for October was at 49.2, down from 50.1 in September. 

The country’s composite PMI, gauging manufacturing and services activity, stood at 49.0, compared to last month’s reading of 50.9.

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