China’s inflation fails to perk up, defies broader recovery
- 10th November 2020
- Posted by: Hakeem
- Category: Business plans
BEIJING (Reuters) – China’s factory-gate prices fell at a sharper-than-expected pace in October, weighed by soft demand for fuel even as the country’s trade and manufacturing sectors staged impressive recoveries from their COVID-19 slump.
Consumer inflation was also soft, easing to an 11-year low as pork prices snapped a year-and-a-half of steep increases that were fuelled by critical shortages of the popular meat.
While the weaker price gauges largely reflect swings in volatile items, they also show upstream demand for industrial goods remains tepid overall in the world’s second-largest economy, despite signs of modest improvement in recent months.
The producer price index (PPI) fell 2.1% from a year earlier, the National Bureau of Statistics said in a statement on Tuesday, the same pace as in September and slightly more than a 2.0% decline tipped by the median forecast from a Reuters survey of analysts.
“We expect both CPI and PPI to be subdued in Q4,” said Zhaopeng Xing, markets economist at ANZ. “However, inflation will likely rebound after Q1 2021, thanks to the growing demand post the pandemic.”
On a monthly basis, the PPI was unchanged, slowing from a 0.1% increase the previous month.
Oil and gas extraction prices fell 4.9% month-on-month in October while fuel processing costs declined 1.6%, Dong Lijuan, a senior statistician with the NBS, said in a statement.
The weak inflation contrasts with brisk growth in exports and manufacturing activity, which were seen as signs of a sustained recovery in China’s industrial sector.
China’s economic growth accelerated to 4.9% from a year earlier during the third quarter as activity extended its recovery from a record slump at the start of the year.
Analysts expect the economy to post a small gain for all of 2020 and then expand at a more robust pace in 2021, partly on hopes that COVID-19 vaccines will become available globally.
China’s consumer price index rose 0.5% from a year earlier, the slowest since October 2009, separate data showed, missing the 0.8% rise tipped by the Reuters poll and a 1.7% rise in September.
Pork prices fell 2.8% year-on-year in October, marking the first decline after 19 months of sharp increases due to supply constraints from the African swine fever. It had risen 25.5% in September.
The core inflation rate, excluding volatile food and energy prices, remained soft, edging up just 0.5%.
“Consumer price inflation looks set to drop back further in the near-term as pork supply continues to recover from last year’s African swine fever outbreak,” said Julian Evans-Pritchard, senior China economist at Capital Economics, in a note after the data release.
“Policymakers are likely to look through the volatility in food prices and focus on the recovery in underlying inflation. As such, we don’t think low headline inflation will prevent the People’s Bank (of China) from raising interest rates next year.”