With for the first time in more than a decade, the consumer price index of China dropped in November with a drop in food prices.
According to data from China’s National Bureau of Statistics on Wednesday, there was a drop of 0.5 per cent year on year in the month of November in the consumer price index, a measure of inflation that tracks prices for a basket of consumer goods and services.
According to the Wind Information database, this is the first such drop in the index since October 2009.
Driven by a 12.5 per cent year on year drop in the price of pork, food prices noted a drop of 2 per cent in November. Last year, there was a sudden rise in the price of pork, the Chinese meat staple, because of a shortage of the meat which was due to an outbreak of African swine fever among the pig farms in the country.
Ting Lu, chief China economist at Nomura, said that the drop in the price of pork in November is less meaningful because there was a sharp increase in pork prices in the last three months of 2019. “The negative (year-on-year) inflation does not mean deflation for China,” he said.
No major change in its monetary policy from the People’s Bank of China because of the fall in eth CPI was expected by economists and analysts.
There was a 0.5 per cent year on year rise in November in the so-called core CPI — which excludes food and energy prices. According to the statistics bureau, there was a rise of 1.5 per cent in medical care prices, while there was a 1 per cent year on year growth in education, culture-related activities and entertainment prices.
There was however a 1.5 per cent year on year drop in the month of November in the producer price index, which measures prices of goods and services from the perspective of sellers. Compared to the figures in October, that drop was 0.6 per cent less according to the statistics bureau.
“The underlying economy is strong given the narrowing PPI deflation,” Larry Hu, chief China economist at Macquarie, said in an email. And consequently, it is more likely that the overall drop in consumer prices will be overlooked by the China’s central bank and instead accord more focus on reducing some stimulus, he said.
The shock of the coronavirus pandemic caused a contraction in China’s economy at the start of the year. Consumers are still under pressure even though growth has recovered since then. Aaccording to the “China Shopper Report” released last week by research and consulting firms Bain and Kantar Worldpanel, in the first three quarters of the year, there has been a 2.1 per cent drop in the average selling prices for a basket of household consumer goods. price drop came as volume grew 2% from a year ago.
“Because of the uncertainty of Covid and also people’s uncertainty on their disposable income, there’s a tendency of going for more value for money,” Derek Deng, partner at Bain and co-author of the report, said in a phone interview Wednesday. “Also, to make up for the loss during the first half of the year, a lot of the brands and categories increase(d) their levels of promotion.”
(Adapted from CNBC.com)