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. China’s official consumer price index (CPI) fell to minus 0.5 per cent in November from a year earlier, from 0.5 per cent growth in October, according to data released by the National Bureau of Statistics (NBS) on Wednesday. This was the lowest level since October 2009, when it also reached minus 0.5 per cent. 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. Though the country has had to contend with the pandemic, the CPI reading in the first 11 months flies in the face of Beijing’s so-called dual circulation strategy that aims to drive future growth by relying on domestic consumption. “It’s not painting a picture of consumer spending exuberance,” said He Wei, a China economist at research firm Gavekal. Mild deflation may force the People’s Bank of China to be more prudent in scaling back monetary easing, he added. China inflation: how is it measured and why is it important? Julian Evans-Pritchard, senior China economist at Capital Economics, said the drop in November CPI “was almost entirely driven by improvements in pork supply and isn’t evidence of faltering demand.” Larry Hu, a China economist at Macquarie Capital, said that China’s economy is still booming and the central bank may not factor the CPI reading too much in its policy consideration. “The CPI deflation is mainly due to the high pork prices in late year,” Hu noted. Whether CPI is a good indicator for consumer inflation is a matter of debate. China’s former central bank governor Zhou Xiaochuan wrote last month that inflation indicators must factor in asset prices or they will lose relevance to reality. Wen Bin, the chief economist at China Minsheng Bank, said there was no need to worry about real deflation as overall economic growth was accelerating. “It’s not right to read too much into the negative CPI as it’s caused by a high base last year,” Wen said in a note. Meanwhile, the decline in China’s producer price index (PPI), reflecting the prices that factories charge wholesalers for their products, slowed to minus 1.5 per cent in November from a year earlier, compared with the 2.1 per cent fall in October. 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 a year earlier, up from 3.2 per cent in the second quarter, after a 6.8 per cent contraction in the first quarter. 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, followed by a further acceleration to 8.2 per cent in 2021. Last month, China’s exports surged at the fastest pace in almost three years, resulting in the biggest monthly export haul in the country’s history, according to data released by its customs agency on Monday.