China's client costs are falling for the primary time since 2009
People wearing face masks move packages of vegetables in an agricultural produce wholesale market as the country is hit by a novel coronavirus outbreak on February 19, 2020 in Beijing, China.
Tingshu Wang | Reuters
BEIJING – China's consumer price index fell for the first time in about a decade in November as food prices fell.
The consumer price index, a measure of inflation that indicates the prices of a basket of consumer goods and services, fell 0.5% in November year-over-year, the Chinese Bureau of Statistics said on Wednesday.
According to the wind information database, the decrease was the first decrease since October 2009.
Food prices fell 2% as pork prices fell 12.5% year over year in November.
The fall in prices for Chinese meat staples follows an increase last year due to a pork shortage following an African swine fever outbreak.
The sharp rise in pork prices in the last three months of 2019 makes the November decline less significant, Ting Lu, chief economist for China at Nomura, said in an email. "The negative inflation (year-on-year) does not mean deflation for China," he said.
Economists did not expect the People's Bank of China to make any major changes in monetary policy due to the decline in the CPI.
The so-called core CPI – excluding food and energy prices – rose by 0.5% in November compared to the previous year. Health care prices rose 1.5%, while prices for education, culture-related activities, and entertainment rose 1%, according to the Bureau of Statistics.
The producer price index, which measures the prices of goods and services from the point of view of sellers, fell by 1.5% in November compared to the previous year. That was 0.6 percentage points less than in October, said the statistics office.
"The underlying economy is strong in the face of narrowing PPI deflation," Macquarie chief economist for China said Larry Hu in an email. As a result, he expects the Chinese central bank to look beyond the general decline in consumer prices and focus on reducing some incentives.
China's economy contracted earlier this year due to the shock of the coronavirus pandemic. While growth has since recovered, consumers are still under pressure. Average sales prices for a basket of household consumer goods fell 2.1% in the first three quarters of the year. This emerges from the "China Shopper Report" published last week by research and consulting firms Bain and Kantar Worldpanel. The drop in prices was due to a volume growth of 2% compared to the previous year.
"Because of the uncertainty surrounding Covid and people's uncertainty about their disposable income, there is a tendency to seek better value for money," said Derek Deng, partner at Bain and co-author of the report, in a telephone interview on Wednesday. "To make up for the loss in the first half of the year, many brands and categories (d) are increasing their advertising measures."