China Underground > China Finance > As inflation slows on weak demand, China’s producer prices decline

As inflation slows on weak demand, China’s producer prices decline

While consumer inflation slowed in November, factory-gate prices in China continued to decline annually.

This indicates poor activity and tepid demand in an economy that has been constrained by stringent financial restrictions. Analysts predicted that the government will maintain low-interest rates and take steps to increase confidence. According to National Bureau of Statistics (NBS) statistics released on Friday, the producer pricing index (PPI) was down 1.3% from a year earlier, maintaining the annual drop witnessed in October. This was less drastic than the 1.4% decline predicted in a Reuters survey. The consumer price index (CPI) increased 1.6% from a year earlier in November, which was less than the 2.1% annual increase observed in October but in line with a Reuters poll. This was the weakest rate of growth in eight months.

According to Reuters, tuesday’s high-level political meeting of the Politburo of the ruling Communist Party stressed that the government’s priorities for 2023 will be stabilizing development, fostering domestic demand, and extending its borders. Zhang stated that after loosening pandemic rules during the previous week, the government will still take other steps to boost the economy.

Due to the unyielding COVID-19 limitations and waning global demand, growth in the second-largest economy in the world has slowed this year.

Record COVID-19 infections and associated restrictions that interrupted production and restricted movement were matched by producer price deflation and weaker consumer price inflation in November.

Although the change in pandemic policy has been welcomed by the markets, experts predict that it would likely slow growth over the coming months as illnesses rise, with an economic recovery coming only later in 2023.

With prices falling 18.7%, the steel industry led the way in producer deflation. The food markets contributed to the slower rise in consumer prices.

Compared to a year ago, food costs increased by 3.7%, while they increased by 7.0% in October. Pork was one of the food items that contributed to the food category’s moderated inflation rate; although its annual increase was 51.8% in October, it was only 34.4% in November.

In November, core annual inflation, which excludes volatile food and energy costs, remained constant from October at only 0.6%. Since August, the benchmark one-year loan prime rate set by China’s central bank has remained at 3.65%. Next year, it anticipates that consumer inflation will remain mild.

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