BEIJING - China’s factory-gate prices contracted again in November while consumer inflation eased as disruptions from Covid-19 outbreaks and restrictions hurt manufacturing activity and reduced demand.
The producer price index fell 1.3 per cent in November from a year earlier after declining by the same magnitude in October, the National Bureau of Statistics said on Friday. Economists surveyed by Bloomberg had expected a 1.5 per cent drop in prices.
Consumer inflation eased to 1.6 per cent from 2.1 per cent in October, in line with economists’ projections. Core inflation, which excludes volatile food and energy prices, was unchanged at 0.6 per cent.
The data suggests “economic momentum continued to weaken,” said Zhang Zhiwei, president and chief economist at Pinpoint Asset Management. “I expect the government will do more to boost market and household confidence. The fast pace of reopening indicates the government’s sense of urgency.”
Record-high Covid infections in November, followed by sporadic outbreaks and movement curbs, curbed economic activity last month. Both the manufacturing and services sectors took a big hit in the month, while trade contracted at a steeper pace.
Since then, Beijing has announced several significant steps toward rolling back its strict Covid Zero policy and the government has signaled a focus on boosting economic growth next year. The outlook remains uncertain though given a likely surge in infections and more economic disruption in coming months.
Bruce Pang, chief economist and head of research for Greater China at Jones Lang LaSalle, said inflationary pressures may rise as Covid Zero ends.
“China’s potential reopening could bring inflationary challenges, considering a surge in demand, especially the accelerating household consumption, and short-term disruption to labour supply, production and supply chains amid an inevitable exit wave of new cases,” he said.
Producer prices slipped into deflation in October for the first time in nearly two years as global growth softened and commodity costs continued to slide. The drop in November was due to a high base of comparison with last year, according to a statement from Dong Lijuan, chief statistician at the NBS. PPI skyrocketed in 2021 on soaring commodity prices.
Consumer prices, meanwhile, have been kept in check by Covid disruptions that have depressed movement and spending — a contrast to major developed nations that are battling persistently high inflation. Dong attributed November’s easing in part to the continued virus outbreaks.
The subdued inflation this year has left room for the central bank to ease monetary policy even as the Federal Reserve and other major central banks hiked interest rates aggressively.
Economists expect China’s gross domestic product may expand around 3 per cent this year, far lower than a government target given in the spring of about 5.5 per cent. BLOOMBERG
