China factory-gate prices fall for second month in November

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China factory-gate prices fall for second month in November

BEIJING China's factory-gate prices fell for a second month in November while consumer inflation slowed, which indicates weak activity and soft demand in an economy that has been held back by tough pandemic controls.

Analysts said the government should keep interest rates low and take measures to boost confidence.

The producer price index PPI fell by 1.3 per cent on a year ago, unchanged from an annual contraction seen in October, according to National Bureau of Statistics NBS data released on Friday. It was slower than the 1.4 per cent fall tipped in a Reuters poll.

The consumer price index of November increased at its slowest pace in eight months, climbing 1.6 per cent from a year ago, which was less than the 2.1 per cent annual rise seen in October, but in line with a Reuters poll.

According to the data, the economic momentum continues to wane, said Zhiwei Zhang, chief economist at Pinpoint Asset Management.

A high-level political meeting held on Tuesday, the ruling Communist Party's Politburo, emphasised that the government would focus on stabilising growth, promoting domestic demand and opening up to the outside world in 2023.

Although the government had loosened pandemic controls over the past week, it would take further measures to spur the economy, he said.

The Politburo meeting identified weak confidence as a major problem for the economy, he said. I think the government will do more to boost market and household confidence. The government's sense of urgency is shown by the fast pace of reopening. Growth in the world's second-largest economy has sagged this year, largely due to the uncompromising COVID 19 curbs, as demand for the second-largest economy has waned.

Record COVID 19 infections and related measures that disrupted production and curbed mobility accompanied the producer price deflation and milder consumer price inflation of November.

While markets have cheered the shift in Pandemic policy, economists say it will likely depress growth over the next few months as infections surge, leading to an economic rebound later in 2023.

In the steel industry, the price of the steel industry was down 18.7 per cent.

Food markets were a part of the reason for the slower growth in consumer prices.

Food prices went up 3.7 per cent on a year earlier in the year, while the rise in October was 7.0 per cent. In November it was 34.4 per cent pricier than in the same month last year, but in October the annual rise had been 51.8 per cent.

In November, the core annual inflation, which excludes volatile food and energy prices, was just 0.6 per cent, unchanged from October.

The inflation pressure in China remains benign, and we expect that the CPI inflation will be around 1.6 per cent by 2023, down from 2.0 per cent in 2022. According to Hao Zhou, chief economist at Guotai Junan Group, the monetary policy will remain accommodative over the next year.

The central bank of China has kept its benchmark one-year loan prime rate at 3.65 per cent since August. Consumer inflation is expected to remain moderate next year.