The latest data released by the Chinese National Bureau of Statistics shows that in November, China’s Consumer Price Index (CPI) fell short of expectations, with the growth rate declining for the third consecutive month, hitting a new low in nearly five months. Coupled with the ongoing contraction in the manufacturing sector, it indicates that the effectiveness of the Chinese Communist Party’s economic stimulus policies is very limited.
On Monday, December 9th, the Chinese Statistical Bureau released data showing that in November, China’s Consumer Price Index (CPI) increased by 0.2% year-on-year, while the Producer Price Index (PPI) decreased by 2.5% year-on-year. The CPI growth was below market expectations, marking a new low since July this year.
Previously, a Reuters survey of economists predicted that the CPI growth rate for November could reach 0.5%, but the actual increase fell short of expectations.
In the manufacturing sector, the PPI for November dropped by 2.5% year-on-year. Although the decline was smaller than October’s 2.9% and analysts’ forecast of 2.8%, it has been on a downward trend for 26 consecutive months.
In terms of industrial producer input prices, prices of black metal materials led the decline with a decrease of 7.1%, followed by a drop of 6.5% in fuel and power prices, a 5.0% decrease in chemical raw material prices, a 3.8% decline in agricultural and sideline product prices, a 2.7% decrease in building materials and non-metal prices, and a 1.7% drop in textile raw material prices.
Maybank economist Erica Tay expressed that although China’s PPI contraction has slightly narrowed, it seems to remain stubborn. She told CNBC in an email, “Accumulated inventories of manufacturing inputs and finished products are huge and growing month by month.”
This indicates that China is still struggling with weak domestic demand, while wholesale prices remain in deflation. Despite a series of stimulus measures taken by the CCP since September, including rate cuts, support for the stock and property markets, and efforts to stimulate bank lending, the situation remains the same.
Becky Liu, Head of China Macro Strategy at Standard Chartered Bank, discussing the ongoing trade tensions between the US and China, said, “We believe that China’s deflation will continue, especially based on the experience of past trade wars.” Liu added, “Inflation, particularly PPI inflation, usually dips into negative territory during such periods, and we believe this time will be no exception.” She further stated that she expects China’s PPI inflation rate to remain negative throughout 2025.
Analysts at Goldman Sachs in a report on December 6 also predicted that China’s CPI data next year will continue to approach zero. Capital Economics’ Assistant Economist Gabriel Ng told Reuters, “We expect overcapacity to keep inflation at low levels in 2025 and beyond.”
Economists hold a generally pessimistic view on China’s economic prospects, as the country is expected to face new tariffs once Trump takes office next year, and the Chinese real estate crisis has no quick resolution in sight, with the property slump expected to weigh on the Chinese economy in the long term.
On Monday, Fitch Ratings lowered its GDP growth expectations for China in 2025 from 4.5% to 4.3% and adjusted the growth forecast for 2026 from 4.3% to 4.0%.