China November producer prices fall for fifth month, CPI soars

Daniel Fowler
December 11, 2019

China's consumer inflation continued to expand in November amid softening pork prices, while factory-gate inflation declined further year on year.

China's consumer price index (CPI), a main gauge of inflation, rose by an average of 2.8 percent from a year earlier in the first 11 months, on track to meet the CPI target of 3 percent set by the government.

As government measures at national and local levels to restore hog production started to take effect, the soaring trend of pork prices affected by African swine fever and cyclical factors has softened in the past weeks.

That was no thanks to the price of pork which surged at an annual rate of 110.2% on year in November, breaking the record made in October as an outbreak of African swine fever continues to devastate China's pig herd and driving the price of meat higher.

However, core inflation - which excludes food and energy prices stayed largely subdued.

The producer price index, which tracks changes in the prices of goods circulated among manufacturers and mining companies, fell 1.4% year-on-year in November, NBS data showed (link in Chinese).

Weak prices were mainly seen in oil and gas extraction and chemical fibre manufacturing sectors.

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Michael Hewson, market analyst at CMC Markets, said: "The latest data from China appears to show an economy that continues to struggle despite a pickup in recent PMI data".

According to the China Animal Agriculture Association, average wholesale pork prices have dropped nearly 20 percent from 56 yuan (US$7.95) per kilogram at the end of October to 46.3 yuan per kilogram at the end of November.

Analysts expect pork will remain in high demand as China prepares to celebrate the Lunar New Year, the peak consumption period for the meat.

Non-food prices, meanwhile, grew 1 percent, contributing 0.77 percentage points to the headline CPI growth.

For the full year of 2019, China is aiming for a CPI target of about 3 percent.

China's central bank governor Yi Gang said this month that Beijing would maintain "normal" monetary policy as long as possible since economic growth is still within a reasonable range and inflation is mild overall.

In month-on-month terms, the PPI dropped by 0.1 percent, reversing the 0.1 percent rebound in the previous month.

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