JAKARTA (TheInsiderStories) – According to the National Bureau of Statistics, China‘s consumer price index (CPI) increased by 2.2 percent year on year (y/y) in November, 0.3 percentage point lower than the previous month.
Food prices contributed 0.49 percentage point to the CPI inflation in November. Pork prices, which are weighted heavily in the CPI basket, declined at a slower pace for the sixth consecutive month in November.
Due to improved weather conditions, fresh vegetable prices edged up only 1.5 percent y/y in October, down 8.6 percentage points from the growth rate recorded in October.
Non-food prices contributed 1.68 percentage points to the inflation. Owing to falling oil prices, the growth rates of vehicle fuel prices and residential water, electricity and fuel prices were down 9.4 and 0.6 percentage points, respectively, in November compared with October.
China’s producer price index (PPi) dipped to an eight-month low of 2.7 percent y/y in November, down 0.6 percentage point from October. The headline deceleration was driven by weaker upstream price inflation.
In particular, the manufacture of chemical raw materials and chemical products, the manufacture and processing of ferrous metals, the extraction of petroleum and natural gas, and the processing of petroleum, coking and nucleus fuel sectors together contributed 0.74 percentage point to the fall of y/y PPI in November compared with October.
Yanjun Lin, senior economist at IHS Markit rated China’s CPI is expected to face mild upward pressure in the coming months. The central bank’s monetary easing measures will pose an upside risk to inflation.
Low pork profitability and the spread of African swine fever will reduce pork supply and push up pork prices. However, as China is expected to ramp up agricultural imports from the US after the two sides agreed to a temporary trade ceasefire, this will further ease food price inflation. In addition, oil prices may remain weak and therefore lower transportation price inflation.
The PPI is expected to continue to fall in the months ahead. In the face of headwinds from the US-China trade conflicts, the government has temporarily eased off on overcapacity cuts and pollution curbs to stimulate domestic demand. This will increase the supply of industrial goods and drag on the PPI. Moreover, weaker oil prices will pose a downside risk to the PPI.
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