China's Consumer Inflation Hits Five-Month Low

BEIJING (Reuters) – China's consumer inflation fell to a five-month low in November as fresh food prices declined, while factory deflation continued, indicating limited impact from Beijing's recent economic efforts.

The world's second-largest economy faces potential new tariffs under a second Donald Trump administration and must contend with other challenges, suggesting more policy stimulus will be needed to support fragile growth.

The consumer price index (CPI) rose by 0.2% year-on-year last month, as reported by the National Bureau of Statistics on Monday, below the 0.3% increase seen in October and less than the 0.5% rise predicted in a Reuters poll of economists.

CPI experienced a month-on-month drop of 0.6%, compared to a 0.3% fall in October and a forecasted 0.4% decline. NBS statistician Dong Lijuan attributed this faster monthly decrease in CPI primarily to a weather-related 2.7% drop in food prices.

November's national average temperature was the highest for comparable periods since 1961, enhancing production and transportation of agricultural goods, which helped to lower fresh food prices, Dong stated.

Core inflation, excluding volatile food and fuel prices, edged up to 0.3% last month from 0.2% in October.

In the factory sector, the producer price index (PPI) fell by 2.5% year-on-year in November, a slower decline than the 2.9% drop in October and the forecasted decrease of 2.8%, extending declines for 26 consecutive months.

"Core inflation edged up and PPI deflation eased, suggesting that stimulus measures are supporting underlying price pressures to some degree. However, we expect overcapacity will keep inflation low into 2025 and beyond," remarked Gabriel Ng, assistant economist at Capital Economics.

While household spending has exceeded forecasts lately, aided by subsidized trade-ins of vehicles and home appliances, this boost hasn't been sufficient to revive China's economy.

Rather than injecting money directly into the economy, Beijing introduced a 10 trillion yuan ($1.37 trillion) debt package in November to alleviate local government financing strains.

Chinese government advisers are advocating for an economic growth target of around 5.0% for 2025, urging stronger fiscal stimulus to lessen the impact of anticipated U.S. tariff increases on exports, as reported by Reuters.

Nevertheless, economists remain generally pessimistic about China’s economic outlook, facing new trade tariffs from a potential Trump presidency and a still-unstable property sector.

Fitch Ratings revised its economic forecasts for China, lowering growth expectations for 2025 to 4.3% from 4.5% and for 2026 to 4.0% from 4.3%, citing risks of even higher U.S. tariffs on Chinese goods.

($1 = 7.2775 Chinese yuan)