China reports consumer deflation for first time since 2009, raising questions about spending power
- China’s official consumer price index (CPI) fell to minus 0.5 per cent in November from a year earlier – down from 0.5 per cent growth in October
- The decline was driven by improvements in pork supply, but the mild deflation has not painted a ‘picture of consumer spending exuberance’, one analyst says
China’s headline consumer inflation dropped into negative territory in November for the first time in 11 years as pork prices eased significantly, raising the risk of further deflation in the world’s second biggest economy and casting doubt on the nation’s real consumer spending power.
Most economists, however, said last month’s decline in consumer prices, which was driven by a rebound in pork supply, did not indicate China’s economic recovery from the coronavirus pandemic was under threat.
The fall was led by a 2.2 per cent year on year decline in the price of food, with the price of pork – a staple meat on Chinese dinner tables – plunging by 12.5 per cent, thanks to a rebound in pig stocks after African swine fever was brought under control.
A negative CPI reading is often seen as a sign of weak consumer spending and sluggish economic growth. China set a CPI target of about 3.5 per cent for 2020, compared with 3.0 per cent last year, but consumer prices between January and November rose only 2.7 per cent from a year ago.