Shoppers view vendors’ goods on a street in Beijing
Tomohiro Ohsumi | Bloomberg | Getty Images
China’s consumer prices fell at the fastest pace in three years in November, while factory door contraction deepened, indicating growing deflationary pressures as weak domestic demand casts doubt on the economic recovery.
Data from the National Bureau of Statistics on Saturday showed that the consumer price index fell by 0.5% compared to the previous year and compared to October.
The declines were deeper than the average decline of 0.1%, year on month, in a Reuters poll forecast. The year-on-year decline in the CPI was the largest since November 2020.
Year-on-year core inflation, excluding food and fuel prices, was 0.6%, the same level as October, indicating the daunting task facing Chinese authorities to revive demand as deflationary forces persist.
Although consumer prices in the world’s second-largest economy have been teetering on the brink of deflation in recent months, China’s central bank governor Pan Zongsheng said last week that inflation is expected to be “heading higher.”
The producer price index fell by 3.0% year-on-year versus a 2.6% decline in October, marking the 14th consecutive month of decline and the fastest since August. Economists had expected a 2.8% decline in November.
Trade data and mixed manufacturing surveys have kept alive calls for more policy support to support growth.
China’s economy has faced multiple headwinds this year — including mounting local government debt, a faltering housing market, and tepid demand at home and abroad — as consumers tighten their wallets, wary of uncertainty amid an elusive economic recovery.
Moody’s on Tuesday issued a warning about downgrading China’s credit rating, saying the costs of rescuing local governments and state enterprises and controlling the real estate crisis will weigh on the economy.
China’s Ministry of Finance described the decision as “disappointing”, saying that the economy would rebound and that risks could be controlled.
The Politburo, a top decision-making body of the ruling Communist Party, was quoted by state media on Friday as saying that authorities would stimulate domestic demand and boost economic recovery in 2024.
Markets await further government stimulus at the Central Economic Work Conference, which will hold its annual agenda later this month.