BEIJING (Reuters) – Chinese factory prices fell for the first time in two months in November, slowing consumer price inflation. This points to weak activity and weak demand in an economy that has been constrained by stringent pandemic controls.

Analysts said they expected the government to take steps to keep interest rates low and boost confidence.

Data from the National Bureau of Statistics (NBS) released on Friday showed the producer price index (PPI) fell 1.3% year-on-year, unchanged from the annual contraction seen in October. This was slower than his 1.4% drop expected in a Reuters poll.

The Consumer Price Index (CPI) rose at its slowest pace in eight months in November, rising 1.6% year-on-year. This was lower than his 2.1% annual gain seen in October, but is in line with Reuters polls.

Zhiwei Zhang, chief economist at Pinpoint Asset Management, said: “These data suggest that economic momentum is (continuing) weakening.

A high-level political meeting of the ruling Communist Party’s political bureau on Tuesday emphasized that the government will focus on stabilizing growth, boosting domestic demand and opening up to the outside world in 2023.

Zhang said the government eased pandemic measures over the past week but would take further steps to stimulate the economy.

“The Politburo meeting identified weak confidence as a key problem for the economy,” it said. “We expect the government to do more to boost market and household confidence. The rapid pace of reopening shows the urgency of the government.”

Growth in the world’s second-largest economy has been sluggish this year, largely impacted by the uncompromising containment of COVID-19, while global demand has also faltered.

A fall in producer prices and a modest rise in consumer prices in November, accompanied by record COVID-19 infections and related restraints, disrupted production and restrained movement.

Markets welcome shift in pandemic policy, but economists say it will Likely to slow down growth Over the next few months, infections surge and the economy recovers in late 2023.

Producer deflation was led by the steel industry, with prices falling 18.7%.

Part of the explanation for the slowdown in consumer price growth has been in food markets.

Food prices were up 3.7% year-on-year, compared to a 7.0% gain in October. In the food category, pork was a factor in keeping inflation under control. The price in November was 34.4% higher than the same month last year, while the annual increase in October was 51.8%.

Excluding volatile food and energy prices, the underlying core annual inflation rate was just 0.6% in November, unchanged from October.

“China’s overall inflation pressure remains moderate, and we expect CPI inflation to be around 1.6% in 2023, up from 2.0% in 2022,” Hao Zhou said. will remain accommodative,” he said. Chief Economist of Guotai Junnan Group.

China’s central bank has maintained its benchmark one-year loan prime rate at 3.65% since August. Consumer prices are expected to remain modest next year.

Reported by Liangping Gao and Liz Lee. Edited by Edmund Klamann and Bradley Perrett

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