China CPI falls at fastest rate in 3 years

China’s consumer prices fell at the fastest rate in three years in November, according to data published over the weekend.

The consumer price index fell 0.5% on both an monthly and annual basis compared with October, data from the National Bureau of Statistics published on Saturday revealed. Consensus forecasts were for a 0.2% decline.

Core inflation, which excludes volatile food and energy prices, was unchanged at 0.6%.

The producer price index fell 3.0% year-on-year against a 2.6% drop in October, the 14th consecutive decline and the quickest since August. Economists had forecast a 2.8% fall in November.

"Consumer demand is likely to revive only gradually, given soft sentiment and a shaky labour market. The December Politburo meeting statement stuck a more confident tone about China’s recovery prospects than the mid-year readout," said Duncan Wrigley, chief China economist at Pantheon Macroeconomics.

"Policymakers called for 'appropriately intensifying' fiscal policy, while monetary policy should flexible and targeted; that is fiscal policy should take the lead in supporting growth."

"This means China probably will continue to channel fiscal stimulus though infrastructure and manufacturing investment, trusting this to spillover into domestic demand, and hence jobs and ultimately consumption."

"The statement offered no hint that policymakers are considering a big consumer-led or credit-based stimulus. The Central Economic Work Conference, likely to take place in the next week or so, should confirm this policy approach."

Reporting by Frank Prenesti for Sharecast.com