China’s inflation rate seen falling sharply on lower pork prices, subdued consumer demand
- The National Bureau of Statistics in Beijing is due to release the official October consumer price index (CPI) figure on Tuesday
- As of the end of October, the country’s average pork price had fallen for nine straight weeks, and has been below the level of a year earlier since the third week of October
China’s annual consumer price inflation rate is expected to have slowed to less than 1 per cent in October for the first time in more than three-and-a-half years, thanks to the continued moderation in pork prices combined with protracted weak consumer demand in the wake of the coronavirus pandemic.
Amid a continued drop in price pressures in the current economic recovery, some economists have warned of rising risks of deflation – a sustained drop in consumer prices – unless Beijing maintains a sufficiently loose monetary policy to boost demand.
The anticipated figure would not only mark the third consecutive monthly slowdown, it would also be the lowest inflation rate since February 2017 and fall under the psychologically important threshold of 1 per cent for the first time since March 2017.
“[The drop will be] led by falling pork price pressures, due to both a high base [of pork prices] in October 2019 and the continued moderation in pork prices this October,” Nomura economists wrote in a note published on October 29.
Pork prices are expected to have dropped by 1.15 percentage points in October, compared with September, with annual price changes for beef, lamb, poultry, vegetables and eggs all having a negative, albeit limited, impact on headline consumer inflation.