China consumer inflation hits near two-year high despite deeper-than-expected producer deflation
People walk along Huguosi street in Xicheng district, a dedicated food street, on August 23, 2024 in Beijing.
Adek Berry | AFP | Getty Images
In China, consumer inflation rose to its highest level in almost two years in November, while producer price deflation worsened; This underscores the challenges policymakers face in stimulating domestic demand in the face of ongoing trade tensions.
Consumer prices increased by 0.7% compared to the previous year, reaching their highest level since February last year. Office for National Statistics data showed Wednesday. The increase followed a 0.2% increase in October and matched the 0.7% increase expected in a Reuters survey of economists.
Ex-factory prices fell 2.2% in November from a year earlier, missing forecasts for a 2% decline and extending the deflationary period into its fourth year. This compared with a 2.1% drop in October.
Core inflation, which excludes volatile prices in food and energy, increased by 1.2% on an annual basis in November, remaining unchanged compared to the previous month.
Economists have warned that deflationary pressure on the world’s second-largest economy will continue next year as the protracted housing crisis and weak labor market conditions continue to weigh on household spending, and called for new policy measures to stimulate demand.
While the economy fell to its weakest level in a year in the third quarter, it appears to be on track to meet Beijing’s annual growth target of “around 5 percent” this year, supported by resilient exports as manufacturers increase shipments to markets outside the United States.
China has achieved a trade surplus of more than $1 trillion in the first 11 months of the year, breaking the full-year record set in 2024 as it struggles with ongoing trade tensions and rising economic protectionism around the world.
At a key meeting earlier this month, the Politburo, the ruling Communist Party’s top decision-making body, Increased domestic demand and rebalancing of supplies It is among the most important economic priorities of 2026.
“Although policymakers maintain their easing bias, they seem less inclined to broad-based stimulus measures,” said Goldman Sachs China economist Lisheng Wang, noting that policymakers may need to re-enforce easing rhetoric and step up pro-growth policy efforts next year to offset the impediment from the real estate sector and labor market.
Investors and economists are closely watching the annual Central Economic Working Conference, expected to be held in the coming days, where policymakers will set key growth targets and policy priorities for the coming year. Official figures will not be made public until the annual parliamentary meeting in March.
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