The recovery in pork supply has driven consumer prices in China lower for the first time since 2009, according to new data from the country’s statistics agency.
The consumer price index (CPI), which measures the average change in prices over time that consumers pay for a basket of goods and services, was down 0.5 percent in November from a year earlier. The index came in below market expectations, with a Wall Street Journal poll of economists having forecast it to be unchanged, while analysts polled by Reuters expected it to range between -0.3 percent and +0.5 percent.
In the previous month, the CPI posted 0.5 percent growth, but October’s inflation was still the lowest level in 11 years. In September, consumer prices grew 1.7 percent and were up 2.4 percent in August.
The decline was mainly driven by weaker food prices, which account for nearly one-third of the key gauge of retail inflation. The price for pork, the main source of protein for the nation, continued to fall in November, after posting the first decline in over a year and a half in October. Pork prices dropped 12.5 percent in November from a year earlier, and, in October, were down 2.8 percent due to a rebound in pig stocks. Core consumer inflation, excluding volatile food and energy prices, held steady at 0.5 percent for the fifth straight month, official data showed.
Economists say the CPI drop seen in November is not a sign of faltering demand, meaning it’s unlikely the central bank needs to take action. According to Capital Economics’ Senior China Economist Julian Evans-Pritchard, “broader price pressures are starting to pick up on the back of the improvement in economic activity.” The temporary drop in consumer inflation is expected to wane in the coming months, when the busiest holiday season, the Lunar New Year, starts in February.
China’s factory gate prices fell at a slower pace last month and came in above analysts’ expectations. The producer price index was down 1.5 percent year on year in November, compared with the 2.1 percent fall in October.
The world’s second-largest economy continues to recover from the historic 6.8 percent contraction it faced in the beginning of the year, when the coronavirus pandemic paralyzed most parts of the country. China’s economy expanded 4.9 percent year on year in the third quarter and is set to be the only major economy to record positive growth this year.
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