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December 10, 2020

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November CPI slides into negative territory

CHINA’S consumer inflation fell below market expectations in November as pork prices dropped further, while the year-on-year decline in factory-gate inflation narrowed.

The Consumer Price Index, a main gauge of inflation, fell 0.5 percent last month from a year earlier, reversing the 0.5 percent rise in October, to enter negative territory for the first time since October 2009, the National Bureau of Statistics said yesterday.

Food prices fell 2 percent year on year last month, reversing the 2.2 percent increase in October and contributing about 0.44 percentage points to the CPI drop, said Dong Lijuan, a senior statistician with the NBS.

Dong said the weakening food prices were the main factor that dragged the country’s CPI into negative territory.

Pork prices plunged 12.5 percent from a year earlier, exceeding the October decline by 9.7 percentage points, as supply recovered from the African swine fever in recent years. The prices of eggs, chicken and duck saw widening year-on-year drops in November, while those of vegetables and fruits climbed 8.6 percent and 3.6 percent year on year respectively in November.

“Although CPI inflation was negative in November, this does not mean that China’s economy is experiencing deflation,” said Lu Ting, chief China economist with Nomura, in a research note. The recent year-on-year changes in the CPI are “less meaningful,” considering a huge base effect caused by the surge of pork prices in the fourth quarter of 2019, Lu noted.

In November, pork prices went down 6.5 percent month on month due to recovering hog production, narrowing from the 7 percent decline in October.

A report by Huatai Securities expected pork prices to continue to retreat along with rising supply, which is likely to be the main drag for food CPI until the second or third quarter of 2021.

Besides pork prices, experts said the slump of global crude oil prices was also an important driver of the decline in headline CPI inflation.

Excluding food and energy prices, China’s core CPI edged up 0.5 percent in November, with the year-on-year growth rate remaining the same for five consecutive months, according to the NBS.

The data yesterday also showed China’s producer prices saw a narrowed decline in November amid a steady recovery in industrial activities. The producer price index, which measures costs for goods at the factory gate, fell 1.5 percent year on year in November, following a 2.1 percent drop in October.

In month-on-month terms, PPI inflation rebounded 0.5 percent in November from zero percent in the previous month, as industrial production and market demand extended recovery, Dong said.

Among the 40 surveyed industrial sectors, 24 saw prices rise month on month in November, up from 12 sectors seen in October. With increasing demand for winter heating, the PPI for coal mining as well as gas production and supply sectors rose 2.2 percent and 2.8 percent month on month, respectively.


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