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December 12, 2009

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Home » Business » Economy

Deflation ends as CPI finally increases

CHINA'S consumer prices finally rose in November on ample liquidity and robust consumption, ending a losing streak, or deflation, for nine straight months.

But an official of the National Bureau of Statistics cautioned that the rise in prices didn't necessarily point to growing inflationary pressure, because the increase in the Consumer Price Index last month was mainly driven by fluctuating costs in the food sector.

The CPI gained 0.6 percent from a year earlier last month while it fell 0.5 percent in October, the bureau said yesterday.

Food prices rose 3.2 percent, and non-food prices dipped 0.7 percent.

Deflation is considered harmful to the economy because people may expect prices to go down further and delay their spending.

China's Producer Price Index, the factory-gate measurement of prices, also declined 2.1 percent from a year earlier, less than the drop of 5.8 percent in October.

"In line with forecast, CPI inflation rose in November, driven primarily by food prices," said Wang Qing, a Morgan Stanley economist. "We believe the early onset of wintry weather last month could have contributed to the rise in food prices."

Li Xunlei, an analyst at Guotai Jun'an Securities Co, said the rise in food prices could have lifted the CPI, but ample liquidity and robust consumption were the main causes.

China's M2, the broadest measure of money supply, rose 29.74 percent from a year earlier to 5.95 trillion yuan (US$871 billion) by the end of November.

Retail sales continued to grow strongly by 15.8 percent annually to 1.13 trillion yuan in November. The sales in the first 11 months swelled 15.3 percent to 11.2 trillion yuan.

In November, vehicle sales surged 61.5 percent annually, boosted by government subsidies to purchase fuel efficient cars.


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