China’s inflation eased in November, reflecting weaker consumer demand and ongoing factory deflation, despite the government’s efforts to stabilize the economy.
The data highlights the limited impact of recent stimulus measures and points to the need for further policy support amid growing domestic and external pressures.
The Consumer Price Index (CPI), a key gauge of inflation, rose by just 0.2% year-on-year in November, down from October’s 0.3% increase and below the 0.5% rise projected by economists in a Reuters poll. On a month-to-month basis, consumer prices fell 0.6%, a sharper drop than the 0.3% decline in October.
According to Dong Lijuan, a statistician at the National Bureau of Statistics (NBS), the faster decline was driven mainly by a 2.7% drop in food prices. Favorable weather conditions in November, with the highest average temperature for the period since 1961, supported agricultural production and transportation, resulting in lower prices for fresh food, especially pork, fruits, and vegetables.
However, core inflation, which strips out volatile food and energy prices, edged up to 0.3% from 0.2% in October, a sign that some underlying price pressures remain.
China’s Producer Price Index (PPI), which measures the cost of goods at the factory gate, declined for the 26th consecutive month. However, the pace of deflation slowed, with prices falling 2.5% year-on-year in November compared to a 2.9% drop in October. The result was better than the 2.8% decline projected by analysts.
While the easing PPI deflation suggests that stimulus measures may be supporting some industrial sectors, analysts caution that excess production capacity will likely keep inflation pressures subdued through 2025. Gabriel Ng, assistant economist at Capital Economics, noted that while corporate and household confidence has improved, significant challenges remain.
China’s economic outlook is further clouded by the potential return of trade tariffs from the United States under the second term of President-elect Donald Trump. Trump has promised to introduce an additional 10% tariff on Chinese imports, adding to the trade friction that has plagued the two economies for years.
Chinese government advisers have already called for stronger fiscal support to counter the impact of potential US tariff hikes. The government is reportedly targeting an economic growth rate of around 5% for 2025, but meeting this goal may require more significant measures to boost household spending and support the property sector, which remains under pressure.
Adding to the challenges, Fitch Ratings recently downgraded its growth forecast for China, lowering its 2025 GDP growth projection from 4.5% to 4.3%, and its 2026 forecast from 4.3% to 4.0%, citing risks linked to US tariffs and broader external uncertainties.
The November inflation data comes just ahead of key policymaking events in China. The Communist Party’s Politburo is expected to meet this week to review economic policy, followed by the Central Economic Work Conference, where the government will set its economic targets and goals for 2025.
Zhiwei Zhang, chief economist at Pinpoint Asset Management, argued that while economic activity has stabilized, recovery remains too weak to generate significant inflation. He emphasized that more substantial fiscal support will be required to move the economy out of its current deflationary state.
Recent efforts to boost economic growth include a 10 trillion yuan ($1.37 trillion) debt package aimed at easing financing pressures on local governments. However, economists believe these measures may not be enough to revive consumer demand and stabilize inflation.
The Financial Times, Bloomberg, and Reuters contributed to this report.
