China Inflation


Inflation continues to decline in November

In November, consumer prices rose 4.2% over the same month last year, which undershot both the 5.5% registered in October and the 4.5% expected by the markets. Inflation has fallen by almost two full percentage points since September and currently lies at its lowest level in nine months. The main drivers behind the drop were lower price increases for food, which slowed to 8.8% (October: +11.9% year-on-year) and housing. That said, the subdued print also benefited from a favourable base effect. Core inflation, which strips out volatile food costs, also slowed from 2.7% in October to 2.2% in November, which represented the lowest reading so far this year. Meanwhile, producer price inflation dropped from 5.0% in October to 2.7% in November, which is in line with the moderation seen in input prices of the purchasing managers' index. Moreover, the print undershot the reading of 3.4% expected by the markets and represents the lowest rate since December 2009. Due to the sharp moderation seen in November, annual average producer price inflation slowed from October's 6.7% to 6.4%. Despite the sharp moderation in year-on-year inflation observed recently, annual average inflation remained unchanged at October's 5.5%, which represents the highest level since December 2008.

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