China consumer inflation hit 11-year low in October, helped by plummeting pork price

Andrew Mullen
·3-min read

China’s consumer prices in October slowed to their lowest level in 11 years, data released on Tuesday showed.

China’s official consumer price index (CPI) rose just 0.5 per cent in October from a year earlier, down from 1.7 per cent in September, the National Bureau of Statistics (NBS) said on Tuesday. This was below the median expectations in a Bloomberg survey of analysts for a rise of 0.8 per cent as it hit its lowest level since October 2009, when it was also 0.5 per cent.

This drop was helped by China’s pork prices in October falling 2.8 per cent from a year ago, down significantly from September when pork prices rose 25.5 per cent, the first time the annual rate has turned negative in 19 months.

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China’s producer price index (PPI), reflecting the prices that factories charge wholesalers for their products, rose 2.1 per cent in October compared with a year earlier, unchanged from September. This was above the median expectations in the Bloomberg survey of analysts for a drop of 1.9 per cent.

China’s core inflation rate, excluding food and energy, stood at 0.5 per cent in October, unchanged from September.

China set a CPI target of around 3.5 per cent for 2020, compared with 3.0 per cent last year.

China’s overall economy has continued its recovery from the impact of the coronavirus, with growth in the third quarter accelerating to 4.9 per cent from 3.2 per cent in the second and a contraction 6.8 per cent in the first.

China is expected to be the only Group of 20 country to record positive growth this year, with the International Monetary Fund projecting growth of 1.9 per cent this year, following by a further acceleration to 8.2 per cent in 2021.

Last month, China’s exports unexpectedly surged by 11.4 per cent from a year earlier while, imports grew by 4.7 per cent.

The year-on-year growth rate [of CPI] has fallen back a lot, mainly due to the high comparison base in the same period last year, the reduction in carry-over factors and pork prices turning to decline from rise

Dong Lijuan

“The year-on-year growth rate [of CPI] has fallen back a lot, mainly due to the high comparison base in the same period last year, the reduction in carry-over factors and pork prices turning to decline from rise,” said Dong Lijuan, a senior statistician at the NBS.

Within CPI, the price of vegetables, beef and mutton all narrowed, while the prices of eggs, chicken and duck fell by 18.3 per cent, 13.2 per cent and 6.5 per cent, respectively.

NBS data also showed the price of fuel for transport fell by 17.2 per cent from a year earlier in October.

“Headline consumer price inflation fell sharply in October, to its lowest since 2009. But this was almost entirely due to falling food prices – core inflation and factory gate inflation held steady last month,” said Julian Evans-Pritchard, senior China economist at Capital Economics.

“Consumer price inflation looks set to drop back further in the near-term as pork supply continues to recover from last year’s African swine fever outbreak. But at the same time, demand-side price pressures are likely to strengthen in the coming months given the rebound in consumption and ongoing infrastructure-led stimulus.

“Policymakers are likely to look through the volatility in food prices and focus on the recovery in underlying inflation. As such, we don’t think low headline inflation will prevent the People’s Bank [of China] from raising interest rates next year.”

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