(Bloomberg) — China’s consumer inflation decelerated in November, in a sign government efforts to support the economy and sentiment haven’t been enough to turn around the weak demand.
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The consumer price index rose just 0.2% from a year earlier, below expectations of 0.4%. Factory deflation extended into a 26th straight month, though the 2.5% drop in the producer price index was slower than October’s 2.9% decrease.
“The deflationary pressure in the economy is persistent. Economic activities stabilized recently but the recovery is not strong enough to boost inflation yet,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management.
China’s economy has struggled to break out of deflation, with consumption growth still far below its pre-pandemic levels. The slowdown has prompted the government and the central bank to start rolling out stimulus measures from late September.
Moderating food inflation is starting to be a drag on price growth. Prices of pork, vegetables and fruits — key components of China’s CPI basket — fell significantly from the previous month. Core inflation, which removes the more volatile food and energy prices, picked up to a three-month high of 0.3%.
Dong Lijuan, chief statistician at the NBS, attributed the modest rise in prices to higher temperatures and a decline in travel last month.
She said the decline in producer prices narrowed because of recent measures to boost the economy. Accelerated real estate and infrastructure projects helped drive up prices of industrial products including cement, non-ferrous metals and steel, Dong noted in a statement accompanying the release.
Falling prices are still eroding corporate earnings while households remain unwilling to spend. But signs have emerged that deflationary pressures are beginning to ease.
A private survey of manufacturing, released this month by Caixin and S&P Global, found that gains in both input costs and output prices accelerated in November. Output price inflation reached a 13-month high.
There was also an improvement in retail sales in October, partly driven by the long holiday that boosted private consumption. Data on industrial output, retail and investment due next week will show whether that continued into November.
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“With the private sector in weak shape, stronger government stimulus is required to spur a recovery in the economy and fend off deflationary risks.”