Slowing Consumer Price Growth

China’s consumer price growth slowed in November, reflecting weak domestic demand despite Beijing’s push to revive spending. The consumer-price index (CPI) rose by 0.2% year-over-year, down from October’s 0.3% increase, according to the National Bureau of Statistics. Economists surveyed by The Wall Street Journal had anticipated a 0.5% rise, indicating a sharper-than-expected slowdown.

  • The producer-price index (PPI) fell 2.5% in November, marking the 26th consecutive month of decline.
  • This was a slight improvement from October’s 2.9% drop and better than the expected 2.8% contraction. However, the persistent decline signals continued challenges in industrial pricing power and weak demand in the sector.

Economic Stabilization Efforts Show Mixed Results

China’s economy has shown some signs of stabilization, supported by Beijing’s stimulus measures. However, Monday’s data underscores the need for further action to encourage spending by both consumers and businesses. The lingering effects of a years-long property market downturn continue to weigh heavily on economic recovery.

  • Despite indications of improved activity in China’s manufacturing and services sectors, the property market remains fragile.
  • New home sales at China’s top 100 developers fell by 6.9% year-over-year in November, reversing October’s 7.1% gain.

This amounted to sales of 363 billion yuan ($49.93 billion) and marked a 16.6% decline from October, according to China Real Estate Information Corp.

Food prices were the largest drag on inflation, with growth slowing sharply to 1.0% in November compared to October’s 2.9%. Meanwhile, nonfood prices remained flat, following a 0.3% decrease in October. Core CPI, excluding volatile food and energy prices, edged up by 0.3% year-over-year, slightly higher than October’s 0.2% increase.

  • The easing of PPI deflation and the modest uptick in core inflation offer some positive indications. Gabriel Ng, assistant economist at Capital Economics, noted that stimulus measures are partially supporting underlying price pressures.
  • However, industrial overcapacity is expected to keep inflation low through 2025 and beyond.

Calls for More Aggressive Fiscal Stimulus

Economists stress the need for stronger fiscal stimulus, particularly direct support for households and the struggling real-estate sector. Previous subsidies to encourage Chinese families to upgrade home appliances and cars have had limited impact. Without bold, consumption-focused policies, inflation is likely to remain subdued.

  • According to Gabriel Ng, stimulus measures are believed to be providing some support to underlying inflation.
  • However, the effects of the stimulus are expected to be temporary, and with the imbalance between supply and demand remaining unaddressed, significant growth in inflation is unlikely in the near future.

Economists are closely watching the Central Economic Work Conference, where China’s top leadership is expected to unveil policy priorities for the coming year. Many hope the agenda will include enhanced efforts to boost domestic demand, particularly in light of potential U.S. tariff hikes under a second Trump administration.

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