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China Inflation November 2020

China: Consumer prices drop for the first time in 11 years in November

Consumer prices fell 0.6% over the previous month in November, following October’s 0.3% decrease. The print mainly reflected a sharp drop in prices of transportation and communication.

Consumer prices swung from an increase of 0.5% in October over the same month in 2019 to a 0.5% decline in November. The print undershot the flat reading that market analysts had expected and represented the lowest result since November 2009. Annual average inflation fell from October’s 3.3% to 2.9% in November.

Despite the year-on-year drop in consumer prices, some economists state that the shock is only temporary. In this regard, Yi David Wang, head of China economics at Credit Suisse, comments that:

“Though the headline CPI was negative in November, we are not concerned about deflation in this form. […] We expect non-food inflation to rise steadily in 2021 as China’s domestic demand improve further especially in the service sector. We believe that headline CPI is about to enter a reflationary cycle by looking at the sequential price momentum instead of distorted year-on-year numbers due to the base effect.”

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