Rise in China Inflation Points to Stimulus Efforts

BEIJING—China's consumer inflation rose in November, as higher food, consumer and property prices suggested that Beijing's bid to spur growth in the world's second-largest economy is having some effect.

While the moderately higher consumer-price index and better-than-expected November imports could help China reach its annual 2015 growth target of about 7% -- which would be its slowest pace in a quarter century—it is too early to predict an economic upturn, analysts said.

"There's a possibility that long-expected fiscal spending is starting to kick in, although it certainly doesn't portend a massive turnaround," said IG Markets Ltd. analyst Angus Nicholson. The trade and inflation figures "suggest a little pick up in November and into December that should give them enough to say they've hit their 7% figure on the dot," he added.

Inflation has become less of a political issue in recent years as price pressure has weakened, giving policy makers more room to ease monetary policy.

While prices bounce up and down a bit these days they are generally under control, said Qi Min, a 33-year old employee working at a Beijing high-tech company. "If there's something that becomes significantly more expensive, I buy less of it and find a substitute," she said, emerging from a Beijing supermarket with her baby son in the shopping cart. "But nowadays most prices seems acceptable," she added.

China's consumer-price index rose 1.5% in November from a year earlier, an increase from its 1.3% rise in October, the National Bureau of Statistics reported on Wednesday. The rise -- which was fairly broad based, affecting food, health care, recreation, education and real estate -- exceeded the median 1.4% gain forecast by 14 economists in a survey by The Wall Street Journal.

China's producer-price index dropped 5.9% in November from a year earlier, a level unchanged from October, the agency said. This is the 45th consecutive month of declining prices at the factory gate as producers battle weak demand, stiff price competition and lower global commodity prices.

"Chinese factories are still struggling with overcapacity problems," said RHB economist Zhang Fan.

The November inflation data follows a string of weak numbers last month. Foreign exchange reserves fell by a larger-than-expected amount, exports declined, an index of manufacturing activity weakened and state-owned enterprise profits fell by nearly 10%. But imports posted a better-than-expected 8.7% year-over-year decline last month compared with an 18.8% fall in October.

Efforts to boost demand over the past year have included stepped-up infrastructure spending, six interest rate cuts and several reductions in required bank reserves, all with limited effect.

Capital Economics said it expects to see upward price pressure next year amid strong wage growth, rising pork prices, moderately higher property prices and continued monetary policy easing. "We expect inflation to increase further in 2016," Capital Economics said in a research note.

Grace Zhu contributed to this article.

(END) Dow Jones Newswires

December 08, 2015 23:05 ET (04:05 GMT)

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