By Gina Lee
Investing.com – Chinese factory gate prices saw a slower fall in November, with cautious signs of continued economic recovery from COVID-19. However, consumer prices saw a fall for the first time in over 10 years as food prices fell.
Data released by the National Bureau of Statistics earlier in the day showed that the consumer price index (CPI) contracted 0.6% month-on-month, below the 0.2% contraction in forecasts prepared by Investing.com and October’s 0.3% contraction. The CPI contracted 0.5% year-on-year, below the forecast 0.8% growth and October’s 0.5% growth.
The producer price index (PPI) contracted 1.5% year-on-year, above the 1.8% contraction in the forecasts and October’s 2.1% contraction. The contraction was smaller than expected, indicating that the PPI fell at a slower pace.
Volatile food prices, namely an easing of pork prices from the previous year’s spike after African Swine Fever decimated China’s pig herd, was the main driver behind the CPI’s fall year-on-year. However, November’s core inflation, which excludes food and energy costs, remained unchanged from October at 0.5%.
The grim data indicates unevenness in world’s second largest economy, even as other data from November showed a steady economic recovery.
Trade data from earlier in the week showed that exports increased 21.1% year-on-year in November and the trade balance grew to $75.42 billion in November, against the forecast $53.50 billion and October’s figure of $58.44 billion, while imports grew 4.5% year-on-year in November, missing the predicted 6.1% growth and October’s 4.7% growth.
Data from earlier in December showed the Caixin Services Purchasing Managers Index (PMI) at 57.8, and the Caixin manufacturing PMI at 54.9 respectively in November. The manufacturing and non-manufacturing PMIs for November came in at 52.1 and 56.4 respectively.
Some investors warned of the recovery’s unevenness, with the yuan’s appreciation and a sluggish global demand remaining challenges for some sectors. Short-term prospects for global demand remain grim, with California, Germany, South Korea and Hong Kong all announcing tightened restrictive measures to curb upticks in the number of daily COVID-19 cases.
“The CPI deflation is likely to extend into early 2021. A key issue will be how the price trends affect activity more broadly. Factory-gate deflation has been a check on the recent pickup in industrial profits. Now, falling consumer prices could be another risk to earnings. For the People’s Bank of China, this would be a non-negligible consideration,” Bloomberg China economist David Qu told Bloomberg.