Inflation slows for first time in 3 months
Print Edition
China’s inflation growth slowed for the first time in three months in November. Analysts say it still indicated mild inflationary pressures and market liquidity conditions will be kept tight.
The Consumer Price Index, the main gauge of inflation, expanded 3 percent from a year earlier last month, the National Bureau of Statistics said yesterday.
The pace slowed from an eight-month high of 3.2 percent in October, as rises in food costs eased to 5.9 percent from 6.5 percent.
The Producer Price Index, the factory-gate measurement of inflation and a harbinger of the CPI, contracted 1.4 percent last month, following a 1.5-percent drop in October.
Zhou Hao, an economist at Australia & New Zealand Banking Group Ltd, said China’s inflationary pressures remained manageable.
“The CPI inflation is likely to be around 3 percent in December, with the whole year inflation at 2.7 percent,” Zhou said. “It will be well below the control target of 3.5 percent for the year.”
Zhou said China’s liquidity tightness will likely persist at least until the Lunar New Year (which falls on January 31) despite mild inflationary pressures, because it will depend on the long-term debt reduction processes of Chinese commercial banks.
“Notably, the elevated funding process will be inevitably passed to companies, which may pose certain downside risks to economic growth as a result,” Zhou said.
China’s gross domestic product expanded 7.7 percent in the first three quarters, with signs of stabilization as the pace picked up to 7.8 percent in the third quarter from 7.5 percent in the second quarter.
Yu Qiumei, a researcher at the statistics bureau, said that although inflation growth moderated, the country should guard against food price rises when some areas were suffering heavy snow and excessive rain.
Chang Jian, an economist at Barclays, said there remained upward pressures on inflation given the marked rebound in capital inflow since September.
But the PPI inflation may stay low in the future based on continued softness in global commodity prices and faster appreciation of the yuan, Chang said.
Zhang Monan, a researcher at the State Information Center, said the different growth direction of the CPI and the PPI suggested a deep-rooted structural imbalance.
“The prices at consumer ends are high while factories are ill with excessive production capability which makes the PPI negative,” Zhang said. “Such a problem needs to be addressed through the governance of overcapacity and further economic restructuring.”
The current inflation environment should allow policymakers more flexibility to implement long-awaited reforms while keep economic growth going, analysts said.
Data already released showed that both China’s manufacturing activity and service activity were resilient in November.
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