China’s factory inflation moderated last month from a 26-year high, with the slowdown providing more room for policymakers to support the economy.
China’s producer price index (PPI) rose 12.9 percent from a year earlier, above economists’ forecasts of a 12.1 percent gain, data from the Chinese National Bureau of Statistics showed yesterday.
The consumer price index (CPI) increased 2.3 percent, the fastest since August last year, but below the projected 2.5 percent gain, the data showed.
Photo: AP
The slowdown is a sign that the Chinese government’s efforts to tame soaring commodity prices and deal with power shortages over the past few months are having an effect.
If the price pressures continue to abate, it might provide more room for the Chinese central bank to add stimulus.
“There’s more space for monetary policy, as consumer inflation will likely stay mild in the first half of next year before rising further in the second half,” said Bruce Pang (龐溟), head of macro and strategy research at China Renaissance Securities Hong Kong Ltd (香港華興證券).
Factory inflation would probably continue slowing in the coming months, while falling oil prices could balance out the effect of rebounding pork prices on consumer inflation, he said.
Consumer inflation sped up, mostly driven by more expensive food.
Vegetable prices jumped 30.6 percent last month, although wholesale prices have started to come down.
Meanwhile, pork prices were much lower than this time last year, dropping 32.7 percent. Without that decline, consumer prices would have risen 3 percent.
However, the cost of pork has started to rise again, with wholesale prices up almost 50 percent from a low in October.
“As policies to stabilize prices and ensure supply have stepped up, the rapid surge in coal, metal and other energy, and raw material prices has been initially contained, leading to a slowdown in PPI,” bureau senior statistician Dong Lijuan (董莉娟) said in a statement accompanying the release.
Core CPI, which excludes more volatile food and energy prices, rose 1.2 percent, as sporadic COVID-19 outbreaks likely continue to weigh on services consumption.
The central bank acted to release 1.2 trillion yuan (US$189 billion) into the economy, announcing on Monday that it would reduce most banks’ reserve requirement ratios by 0.5 percentage points from next week.
While the central bank said that this was not the start of an easing cycle, financial markets are showing some expectation of further action.
The Chinese Communist Party’s top leaders earlier this week indicated that their focus for the coming year is stabilizing macroeconomic conditions and signaled an easing of some property curbs next year, as a real-estate downturn and sporadic COVID-19 outbreaks weigh on the economic outlook.
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