Explainer | China inflation: 4 takeaways from October’s data as pork pummels consumer prices, but is it deflation?
- China’s consumer price index (CPI) fell by 0.2 per cent from a year earlier in October due to deepening food-price deflation
- Producer price index (PPI) fell for the 13th month in a row, dropping by 2.6 per cent in October from a year earlier
1. China is not experiencing ‘deflation’
The main culprit for the decline was a deepening of food-price deflation, according to analysts at Capital Economics, with pork prices subsiding as supplies increased.
Within CPI, overall food prices dropped by 4 per cent last month, year on year, while non-food prices rose by 0.7 per cent.
Within food prices, the negative pork-price-inflation reading deepened in October to minus 30.1 per cent, year on year, due to both a high base and sequentially lower pork prices, said Robert Carnell, regional head of research for Asia-Pacific at ING.
He said month-on-month pork-price inflation dropped to minus 2 per cent in October from 0.2 per cent in September.
“China is not experiencing ‘deflation’ as most headlines attest. But its pork prices are undoubtedly much lower – good news for all except farmers, probably,” Carnell said. “What China has right now is a low rate of underlying inflation, which reflects the fact that domestic demand is fairly weak.