China November CPI undershoots forecasts

Inflation pressures in China continued to recede last month, hinting at softer economic growth head, according to economists.

The year-on-year rate of increase in consumer prices slowed from 2.5% for October to 2.2% in November (consensus: 2.4%), albeit mostly due to a rapid decline in oil and natural gas prices, although food price inflation also fell thanks to a drop in the cost of vegetables.

So-called 'core' consumer prices on the other hand were steady.

But according to Julian Evans-Pritchard at Capital Economics, core prices had been trending lower over the past year, which was consistent with the slowdown evident in economic growth and increased spare capacity.

Producer prices meanwhile fell back from the prior month's clip of 3.3% year-on-year to 2.7%; although that was exactly in-line with economists' forecasts, in month-on-month terms they in fact fell, Evans-Pritchard pointed out, with the cost of several industrial inputs, including steel and copper falling.

"Economic activity looks set to weaken further in the coming months as slowing credit growth continues to weigh on domestic demand and cooling global growth weighs on exports, even if a renewed escalation in trade tensions is avoided," Evans-Pritchard said.

"We expect this to trigger further policy easing which should provide some support against these headwinds. However, given the usual lags involved, these efforts probably won't succeed in putting a floor beneath growth until around the middle of next year."