BEIJING (Reuters) – China’s consumer prices fell sharply in November for the first time in three years as factory-gate deflation worsens, adding to deflationary pressures as weak domestic demand casts doubt on economic recovery. It shows that it is increasing.
The Consumer Price Index (CPI) fell by 0.5% both year-on-year and October, according to data released by the National Bureau of Statistics (NBS) on Saturday.
This exceeded the median forecast compiled by Reuters (down 0.1% year-on-year and month-on-month). The year-on-year decline in CPI was the largest since November 2020.
This figure adds to a range of recent trade statistics and sustained manufacturing surveys, calling for further policy support to boost growth.
Xu Tiancheng, senior economist at the Economist Intelligence Unit, said the data would be worrying for policymakers, citing the decline in global energy prices, the winter He cited the decline of the travel boom and chronic oversupply.
“Downward pressures will continue to increase in 2024 as developers and local governments continue to deleverage and global economic growth is expected to slow,” Xu said.
Core inflation, which excludes food and fuel prices, was 0.6% year-on-year, the same as in October.
Bruce Pang, chief economist at Jones Lang LaSalle, said the weak core CPI is a warning of continued demand weakness, and that this is a key policy shift for China to achieve more sustainable and balanced growth. He said it should be a priority.
Consumer prices in the world’s second-largest economy have been teetering on the verge of deflation in recent months, but People’s Bank of China Governor Ban Gongsheng said last week that inflation was expected to “rise.”
The Producer Price Index (PPI) decreased by 3.0% year-on-year, compared to a 2.6% decline in October, marking the 14th consecutive month of decline and the sharpest decline since August. Economists had expected a 2.8% decline in November.
China’s economy has faced multiple headwinds this year, including rising local government debt, a weak housing market and weak domestic and international demand. Chinese consumers in particular are tightening their wallets, wary of the uncertainty of an elusive economic recovery.
Moody’s on Tuesday warned of a downgrade in China’s credit rating, saying the costs of bailing out local governments and state-owned enterprises and curbing a real estate crisis would weigh on the economy.
China’s Ministry of Finance called the decision disappointing and said the economy had recovered and risks were under control.
The ruling Communist Party’s top decision-making body, the Politburo, said on Friday that authorities will stimulate domestic demand and boost economic recovery in 2024, state media reported.
Markets are awaiting further government stimulus at the Central Economic Work Conference, which will set the annual agenda later this month.
Reporting by Ellen Zhang, Ella Cao and Ryan Woo.Edited by: William Mallard and Edmund Claman
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