China’s PPI up 2.7% in November; consumer inflation eases

China’s factory prices rose in November at their slowest pace since October 2016 as domestic demand lost further momentum, piling pressure on policymakers to unveil more measures to support the economy.

Consumer inflation, meanwhile, eased from the previous month due to lower food prices, according to data published by the National Statistics Bureau yesterday.

The producer price index (PPI), a measure of the prices businesses receive for their goods and services, rose 2.7% in November from a year earlier, compared with a 3.3% increase in October, according to the statistics bureau.

Analysts polled by Reuters had expected producer inflation — also used by economists as a sign of the trends in industrial profits — would cool to 2.7% last month.

On a monthly basis, the PPI fell 0.2%, down from a 0.4% gain in October.

China reported its weakest factory activity in over two years in November as new orders slowed, while profit growth for industrial firms softened for six months in a row.

The slowdown in domestic demand has added to the list of economic worries for China, which is mired in a trade war with the United States, its biggest trading partner.

Domestic demand for industrial goods and services has eased in recent months as Beijing’s multi-year campaign to curb corporate debt and risky lending practices has crimped capital spending and corporate investment.

Prices for raw materials increased 4.6% last month from a year earlier, down from a 6.7% rise in October.

Price rises in the production and processing sector slowed in November from the previous month.

The uncertainty created by the trade war with the United States is hanging over China’s economy, even though a week ago both sides agreed to a 90-day time-out.

There are concerns that the tariff war could still escalate once the truce ends, putting more pressure on Chinese authorities to bolster the economy. China’s central bank has cut the level of cash that banks need to hold as reserves four times so far this year, in a bid to spur lending to businesses.

Policymakers have also reduced taxes and pledged higher infrastructure spending.

China’s consumer price index (CPI) rose 2.2% in November from a year earlier, slowing from 2.5% in October and below expectations of 2.4%.

The government’s full-year target for consumer price inflation is 3%.

On a month-on-month basis, the CPI fell 0.3%.

The statistics bureau attributed the consumer inflation slowdown to a fall in food prices, due to the spread of swine fever.

The food price index rose 2.5% from a year earlier in November, slowing from 3.3% in October. Nonfood prices rose 2.1%, compared with 2.4% growth a month ago.

The core consumer price index, which strips out volatile food and energy prices, rose 1.8% in November.