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China Inflation November 2021

China: Consumer price inflation rises to over one-year high in November; producer price inflation dips

Consumer prices rose 0.40% from the previous month in November, a smaller increase than the 0.70% rise logged in October.

Consumer inflation came in at 2.3% in November, which was up from October’s 1.5%. November’s reading was the highest inflation rate since August 2020, and was influenced by some panic buying by households, and a notably milder year-on-year decline in pork prices. Annual average inflation rose to 0.8% in November (October: 0.6%). Lastly, producer price inflation fell to 12.9% in November, from the previous month’s 13.5%, amid a series of steps taking recently by the government to tame coal prices. That said, the producer price inflation reading was above market expectations.

Consumer price inflation is forecast to average around its current level in 2022, propped up by a tougher base effect for pork prices. Producer price inflation should ease next year, amid a high base of comparison, an easing of supply constraints and a stabilization of commodity prices.

On the inflation outlook, Ho Woei Chen, economist at United Overseas Bank, said:

“We think the PPI has peaked after months of sharp increases and the higher comparison base should set PPI into a slower growth pace ahead. Nonetheless, supply chain disruption and high commodity/ energy prices continue to pose upside risk as this could feed into higher inflation expectation and increase the pass-through from PPI to the CPI. This may further dampen the growth outlook for China next year.”

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