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China's consumer prices fell 0.5 percent year-on-year in November, the sharpest fall in three years, as the world's second-largest economy struggles with worsening deflation.
Consumer prices fell by more than the 0.2 percent forecast in a Bloomberg survey of economists, surpassing the 0.2 percent decline in October.
Producer prices, which are measured at the factory gates and are largely determined by the cost of goods and raw materials, fell by 3 percent and remained in negative territory last year.
Consumer prices reached deflationary territory in July and rose briefly in August before falling again in October. The deflationary trend adds to the economic pressures facing the country's policymakers, including a liquidity squeeze in the real estate sector, weak trade data and a slowing recovery after three years of zero-Covid lockdowns and border closures.
Consumer demand has struggled to recover in 2023 while policymakers have set an economic growth target of just 5 percent, the lowest rate in decades.
Beijing has faced calls to step up stimulus measures this year as the real estate sector continues to slump after several property developers defaulted. The government has cut interest rates and issued new bonds to support growth, but has not carried out major bailouts of project developers.
China's leader Xi Jinping warned this week that the country's economic recovery was still at a “critical stage” as officials vowed to increase fiscal and monetary support.
Ratings agency Moody's Investors Service cut its outlook on China's sovereign credit rating to negative on Tuesday, citing growing risks of slower economic growth in the medium term and the increasing likelihood of greater financial support for weak regions.
China's economic momentum has been hit in recent months by the default of Country Garden, the country's largest private developer by sales, and turmoil at investment firm Zhongzhi, a sign of spillover effects from a difficult real estate market.
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Consumer prices have been affected this year by falling pork prices, a key component of the basket in China's consumer index. Food prices fell 4.2 percent in November.
The ongoing weakness in consumer prices contrasts with inflation in other major economies following the lifting of Covid-19 measures and suggests weak demand among households amid continued caution over their spending. Data this week showed imports fell 0.6 percent last month.
Next week's data will provide insight into the pace of retail sales growth in November. They grew 7.6 percent in October, buoyed by a low base effect from the previous year as Covid shutdowns intensified just before they were abruptly lifted at the end of the year.