China’s Consumer Prices Rise At Fastest Pace Since Early 2024

China’s consumer prices rose last month at their fastest pace in almost two years, data showed Wednesday, following an extended period of deflationary pressure in the world’s second-largest economy.

Beijing has been battling sluggish spending for several years, with a prolonged crisis in the property sector and lingering effects from the Covid pandemic weighing on consumer sentiment.

Leaders have for years been looking to shift the economy towards a model driven more by domestic consumption than exports and manufacturing, which have long been the essential growth engines.

The consumer price index, a key measure of inflation, hit 0.7 per cent year-on-year in November, according to the National Bureau of Statistics (NBS).

The reading was in line with a Bloomberg forecast and well above the 0.2 per cent increase recorded in October.

It was also the fastest pace since a similar rate in February 2024. CPI has not been higher than that since February 2023.

“The expansion… was mainly driven by a shift from declines to increases in food prices,” NBS statistician Dong Lijuan said in a statement.

Fresh vegetable prices in particular surged, Dong noted, reversing nine straight months of decline.

The quicker overall inflation “was the result of a weather-related rise in food prices”, Zichun Huang of Capital Economics wrote in a note.

The data also showed “a decline in services inflation and household appliance prices”, she added.

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Chinese authorities introduced an expanded subsidy scheme earlier this year in a bid to spur flagging consumer activity, but results have been mixed, with a short-term burst in purchases failing to halt a longstanding slump in sentiment.

The latest figures reflected “the fading impact of the consumer goods trade-in scheme on retail sales”, Huang noted.

In a sign of persisting woes, the producer price index (PPI) — which measures the cost of goods before they enter wholesale or distribution — fell to 2.2 per cent last month, NBS data showed. The Bloomberg survey had forecast 2.0 per cent.

China’s monthly PPI has been in negative territory for more than three years, reflecting weak demand and a global oversupply of manufactured goods from the country.

“We expect overcapacity to remain in place, keeping China in deflation next year and in 2027,” Huang said.

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China’s exports have boomed in recent years, providing a key economic lifeline for Beijing despite heightened trade tensions with the United States and other Western governments.

Data on Monday showed China’s towering trade surplus this year surpassed $1 trillion for the first time.

French President Emmanuel Macron warned over the weekend that Europe would “be forced to take strong measures” — including tariffs — if Beijing fails to reduce its massive surplus with the continent.

Despite robust exports and in a further sign of China’s weak domestic consumption, the data also showed imports missed forecasts, rising 1.9 per cent on-year in November.

AFP