Chinese Consumer Prices Show First Annual Decline Since 2009

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Chinese Consumer Prices Show First Annual Decline Since 2009

The falling price of pork, here for sale at a market in the northeastern Chinese city of Shenyang this week, was a driving force in last month’s decline in the consumer-price index.

Photo: str/Agence France-Presse/Getty Images

China’s consumer prices dropped for the first time in over a decade in November, though economists say the decrease doesn’t signal faltering demand in the world’s second-largest economy.

The fall was driven by volatile food prices, including the continued retreat of pork prices as supply recovers from the ravages of African swine fever. Other economic indicators have shown a continued recovery from Covid-19 shocks.

China’s consumer-price index in November was down 0.5% from a year earlier, the National Bureau of Statistics said Wednesday, after a 0.5% rise in October. It was the first negative reading since October 2009. Economists polled by The Wall Street Journal had forecast November’s CPI would come in flat.

The statistics bureau said food prices, down 2.0% from a year earlier, weighed heavily on November’s headline CPI. In October, food prices were up 2.2% from a year earlier.

Among foods, pork—the main source of protein in the Chinese diet—extended its decline, down 12.5% in November after October’s 2.8% drop.

Outbreaks of African swine fever, a highly contagious virus fatal to pigs but not harmful to humans, reduced the country’s hog population by about half in 2019, causing pork prices to more than double.

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This year pork prices have been volatile, but they are trending lower as increased imports—not just of pork but of meats such as beef and lamb as well—make up for the domestic shortfall.

“November’s CPI decline was driven by pork prices and should be short-lived, which won’t be counted as deflation,” said Xing Zhaopeng, an economist at ANZ.

Mr. Xing added that three or more consecutive month-over-month drops in consumer prices would be considered a deflation risk, but that China’s consumer inflation is likely turn positive in coming months: A sharp increase is typical as the Lunar New Year holiday nears. Next year it falls in February.

China’s November CPI was down 0.6% from a month earlier, the second straight monthly fall, according to the official data. Core consumer inflation, which strips out volatile food and energy prices, held steady at 0.5% for the fifth straight month.

The decline in factory-gate prices eased in November: The producer-price index was down 1.5% from a year earlier, compared with October’s 2.1% decline. Compared with a month earlier, the PPI was up 0.5%, thanks to a recent rebound in industrial commodity prices and strengthening demand.

China’s exports rose strongly in November, generating a record trade surplus.

Robust external demand and domestic infrastructure investment are expected to buoy demand for industrial goods and lift the PPI in the months ahead, economists said.

“Looking through the recent volatility in food and energy prices, the inflation data are less downbeat than meets the eye,” said Julian Evans-Pritchard, an economist with Capital Economics.

He said the latest inflation data wouldn’t prevent China’s central bank from tightening its monetary policy next year, as the underlying inflation is likely to pick up in the coming months with economic activity remaining strong.

Write to Erin Mendell at erin.mendell@wsj.com

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