In November, China’s consumer inflation dropped to a five-month low, rising 0.2% year-on-year, below expectations, according to data from the National Bureau of Statistics released Monday.
Analysts surveyed by Reuters had predicted a slight increase in retail inflation to 0.5% in November from a year earlier, up from 0.3% in October.
Core inflation, excluding volatile food and fuel prices, grew 0.3% in November, up from 0.2% in October.
Year-on-year, pork prices rose 13.7%, while fresh vegetables increased by 10.0%.
China’s producer price index, or wholesale inflation, fell for the 26th consecutive month, decreasing 2.5% year-on-year in November, less than the 2.8% drop forecasted by the Reuters poll.
Among industrial producer prices, ferrous metal materials saw the largest decline, falling 7.1%, followed by a 6.5% drop in fuel and power prices, and a 5% decrease in chemical raw materials.
While China’s PPI deflation has slightly narrowed, it remains deeply entrenched, according to Erica Tay, director of macro research at Maybank.
“Accumulated inventories of manufacturing inputs and finished goods are sizable, and growing by the month. This mismatch between supply and demand has been depressing prices,” she told CNBC via email.
Persistent near-zero retail inflation highlights China’s ongoing struggle with weak domestic demand, while wholesale prices stay in deflation, despite Beijing’s stimulus measures since September, including rate cuts, support for stock and property markets, and efforts to boost bank lending.
“We believe deflation will continue in China, especially based on the previous experience during trade wars,” said Becky Liu, head of China macro strategy at Standard Chartered Bank, drawing reference to the ongoing trade war between China and the U.S.
“Inflation, especially PPI inflation, typically falls to negative territory during such periods and this time we see no exception,” she said. Liu stated that China’s producer price index inflation is expected to remain negative throughout 2025.
Goldman Sachs also anticipates near-zero CPI figures to continue in China next year, according to a note from the investment bank’s analysts on Dec. 6.
However, other sectors of China’s economy have shown signs of recovery, with October retail sales surpassing Reuters’ expectations, and manufacturing activity expanding for two consecutive months in November.
China’s top leaders will meet at the annual Central Economic Work Conference starting Wednesday to set economic goals and outline stimulus measures for 2025.
On Monday, Fitch Ratings lowered its 2025 Chinese GDP growth forecast to 4.3% from 4.5%, and revised its 2026 growth forecast to 4.0%, down from 4.3% in September.
“For 2025 and 2026, we assume that U.S. trade policy towards China will take a sharp protectionist turn,” said Fitch Ratings Chief Economist Brian Coulton in the report. While there are “tentative signs of stabilization” in the real estate sector, an ongoing downturn in the property market remains a major risk to the agency’s forecast.
China will release its November trade data on Tuesday and retail sales figures next Monday.