China’s consumer prices last month dropped more than expected on falling food costs, with a key gauge turning negative for the first time in 11 years due to pork prices, official data released yesterday showed.
The consumer price index (CPI), a key gauge of retail inflation, fell 0.5 percent year-on-year due to a high base of comparison in the same period last year, the Chinese National Bureau of Statistics said.
This continued a slide over the past few months driven by easing prices of pork — a staple meat in the world’s second-largest economy whose prices rocketed after an African swine fever outbreak ravaged stocks.
Photo: EPA-EFE
Pork prices dropped 12.5 percent, widening October’s fall and dragging the headline figure down, while other food items such as eggs, chicken and duck also saw a slide in prices compared with last year.
However, the core CPI, which strips out food and energy prices, “continued to remain stable,” rising 0.5 percent from a year earlier, the data showed.
Julian Evans-Pritchard, a senior China economist at Capital Economics Ltd, said that last month’s headline figure was “almost entirely driven by improvements in pork supply and isn’t evidence of faltering demand.”
“To the contrary, broader price pressures are starting to pick up on the back of the improvement in economic activity,” he said.
However, there was improvement in factory-gate prices, with the producer price index (PPI) last month falling 1.5 percent year-on-year — a smaller drop than the 1.8 percent fall a Bloomberg poll of analysts expected.
“Market demand continued to pick up, and industrial product prices continued to rise,” bureau senior statistician Dong Lijuan (董莉娟) said.
The PPI measures the cost of goods at the factory gate, and prices have been dragged by the COVID-19 fallout.
“The improving PPI definitely reinforces the expectation that the Chinese [economic] recovery is on track,” Oversea-Chinese Banking Corp (華僑銀行) Greater China research economist Tommy Xie (謝東明) said.
The People’s Bank of China (PBOC) is likely to look through the first deflation in consumer prices in over a decade, economists said, as the central bank keeps its focus on bringing debt under control.
“The question for the markets is whether the PBOC might slow the policy neutralization process due to extremely low inflation,” said Zhou Hao (周浩), an economist at Commerzbank AG in Singapore. “For now, it seems unlikely as the Chinese policymakers have already stepped up deleveraging measures and started the property tightening.”
Xing Zhaopeng (刑兆鵬), a markets economist at Australia & New Zealand Banking Group in Shanghai, said that it is unlikely that consumer deflation would persist, given “higher crude prices and the coming peak season of travel before the New Year.”
“Inflation will not be a restriction to monetary policy, as both CPI and PPI are expected to improve gradually on a month-on-month basis from now on,” Xing said.
Additional reporting by Bloomberg
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