China still faces deflationary pressures

BEIJING - Although China's consumer inflation picked up in November, flagging producer prices still put high deflationary pressure on the economy, new data showed Wednesday.

China's consumer price index (CPI), a main gauge of inflation, grew 1.5 percent year on year in November, up from a rise of 1.3 percent in October, the National Bureau of Statistics (NBS) said in a statement.

The reading was slightly higher than a 1.4-percent average increase in the first 11 months.

The NBS attributed the rise mainly to rising food prices, as vegetable prices surged 9.4 percent year on year last month, while prices for meat and poultry products rose 6.2 percent. Food prices, which account for nearly one-third of the weighting in China's CPI, rose 2.3 percent from a month earlier and contributed more than half of the headline CPI inflation.

HSBC analyst Qu Hongbin said the November inflation was slightly higher than previous market forecasts, as snow in north China pushed up transportation costs for fruit and vegetables.

Non-food inflation also edged up due to higher prices of medical care, transportation and communication products.

However, average inflation in the first 11 months was 1.4 percent, far below the 2.0 percent in the same period of 2014 and the government target of around 3 percent.

On a month-on-month basis, consumer prices stayed flat in November.

Last month, the producer price index (PPI), a measure of costs for goods at the factory gate, plunged 5.9 percent year on year last month, marking the 45th straight month of decline.

The PPI and CPI are related, as the PPI reflects prices in production, while the CPI reflects prices at the point of consumption. Price fluctuations usually first appear in the production phase before being passed on to consumers.

Producer prices continued to fall broadly, with oil-related sectors and heavy industry such as ferrous metal processing seeing the sharpest price declines, data showed.

PPI deflation has stayed at 5.9 percent for four months in a row, indicating that deflationary pressure in the economy has not relented and monetary easing policies are still necessary in the next two years, Qu said.