Ongoing deflation pressure in China: Producer and consumer prices decreased in November

In November, the Producer Price Index (PPI) decreased by 3% compared to the same period of the previous year, while the Consumer Price Index (CPI) decreased by 0.5%. While producer prices in the country have been declining for 14 months, consumer prices have recorded the fastest decline since November 2020. This increases the risk of deflation in China.

The decline in ex-factory prices of manufacturing products, which started in the last quarter of 2022, continued in the 11 months of 2023. PPI decreased by 3% in November, continuing the 2.6% decrease in October.

While CPI is considered the main indicator of inflation, it decreased by 0.5% in November, recording the fastest decline in the last 3 years. The index decreased by 0.2% in October after remaining stable in September.

While food prices decreased by 4.2% in October, non-food prices increased by 0.4%. Core inflation, calculated when food and energy prices are excluded, was 0.6%.

In China, despite the high inflation trend around the world, factors such as weakness in domestic demand and exports, local governments' debt risks, the decline in the real estate sector and the slowdown in global growth negatively affect the economy.

Price increases are expected to remain below the 3% inflation target set by the government.