China's October 2020 CPI growth rate falls to 11-year low, PPI drops for ninth straight month

4 min read | November 10, 2020 04:18 PM AEDT | By Team Kalkine Media

China's October 2020 CPI growth rate falls to 11-year low, PPI drops for ninth straight month

China’s CPI growth at 11-year low

In September, China CPI rose at a rate of 1.7 per cent. Experts said that in November 2009, China CPI registered an increase of 0.6 per cent recovering from the degrowth of 0.5 per cent in October 2009. The steep drop in the October CPI growth rate has been largely driven by the falling price of food items.

With a CPI growth of 0.5 per cent in October, China has registered a lower-than-expected CPI as compared to the Reuters poll of 0.8 per cent. China has set a CPI target of 3.5 per cent for 2020.

Senior statistician at the NBS Dong Lijuan has said the drop in year-on-year growth rate of CPI has been mainly witnessed due to a reduction in carry-over factors, a sizable decline in the pork prices that were rising until September and a large comparison base in October 2019.

China’s PPI falls for ninth straight month

On the other hand, China’s producer price index (PPI), the key indicator quantifying the prices of goods at factories, fell at a rate of 2.1 per cent in October continuing the declining trend for the ninth straight month. A similar slump in the PPI was observed in September.

China’s PPI has also missed the street estimates, as a Reuters poll predicated a drop of 2 per cent. In January, China’s PPI registered a marginal growth of 0.1 per cent, while in May, a 4-year low degrowth of 3.7 per cent was witnessed.

Factors behind 11-year low CPI growth

A huge denominator remained one of the key reasons behind the slower CPI growth rate as China’s October 2020 CPI came in at 111.4 points and October 2019 CPI was 110.8 points.
An acute slump in the prices of food items led by drop in the prices of pork has contributed to the slower CPI growth. The pork prices in China tumbled for the first time in nearly 18 months.
In October, the pork prices fell by 2.8 per cent as compared to the prices in the same period a year ago. However, the pork prices jumped by as much as 25.5 per cent in September.
Notably, the prices of eggs and chicken have recorded a major fall in October along with the prices of duck. The cost of eggs and chicken nosedived by 18.3 and 13.2 per cent, respectively, whereas the prices of duck slipped 6.5 per cent as compared to the prices recorded in October 2019.
Other than the falling pork prices, a relative decline in the cost of transport; fuel, rent and utilities; clothing and household goods and services have contributed to the slide in China’s CPI for October 2020.
The cost of transport slid 3.9 per cent, cost of clothing dropped by 0.3 per cent, cost of rent and fuel subsided by 0.7 per cent, while the cost of household goods and services de-grew 0.1 per cent in October.
Not all the spending areas observed a drop as the cost of health, education, and other goods & services saw a growth in October.

Looking at a broader perspective, China’s economy is on a recovery track if we compare the gross domestic product (GDP) growth rate of the last two quarters. With the Chinese economy back on growth trajectory, it seems the worst is over for China.

With the GDP growth accelerating by 3.2 per cent in the second quarter to 4.9 per cent in the third quarter from a downtick of 6.8 per cent in the first quarter of 2020. According to the International Monetary Fund (IMF), China’s GDP is expected to record a growth rate of 1.9 per cent for the whole year.

Also Read: PMI indicates a flattening recovery for the UK economy

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