Published: Wed, December 11, 2019
Markets | By Otis Pena

China: Subdued underlying inflation picture - TDS

China: Subdued underlying inflation picture - TDS

Meanwhile, China's producer price index narrowed its on-year drop to 1.4% in November, compared with a 1.6% decline in October and economists' median forecast of a 1.5% drop for November.

A milder fall in factory-gate prices in November than in previous months may have been helped by tentative signs of improvement in manufacturing activity, although economists have noted the recovery could be hard to sustain.

The country's consumer price index rose 4.5 percent from a year earlier, the fastest pace since January 2012, according to data released on Tuesday.

The slightly better result may reflect recent hints of improved manufacturing activity but the Chinese economy remains susceptible to the country's trade dispute with the U.S. and weak internal demand.

The cost of pork more than doubled in November from a year before and prices are likely to remain high as China gets ready to celebrate the Lunar New Year. But even if a deal is struck, economic growth is expected to continue slowing in the current and coming quarters.

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Shen Yun, a senior statistician at the bureau, said prices softened as government measures at national and local levels to restore hog production started to take effect and pork supply was rising. Retail pork prices hovered at around 55 yuan ($7.81) per kg in November, according to agriculture ministry data.

Wholesale pork prices have seen a slight reprieve in November but remain elevated compared with a year earlier. Last week, the government's finance ministry announced waivers for some purchases of USA pork and soybeans.

However, core CPI for November remained benign at 1.4%, down from 1.5% in the previous month.

In the first 11 months of this year, China's consumer inflation was up an annual 2.8%, edging closer to the government's ceiling of about 3% for 2019. "Higher prices of consumer goods in the PPI basket, one component of which is food, were more than offset by more pronounced declines in the prices of industrial goods".

Economists estimate CPI growth will drop to 4.3 per cent year-on-year in December, although it will rebound to around 5.5 per cent in January as demand for pork rises ahead of the Lunar New Year holiday, which falls at the end of January in 2020.

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