On November 9, consumers shopped at a supermarket in Zunhua City, Hebei Province. Published by Xinhua Agency (Photo by Liu Mancang)

The National Bureau of Statistics released November price data on December 9. In November, the national consumer price (CPI) rose 0.2% year-on-year and fell 0.6% month-on-month. 1-11 On average, national consumer prices rose by 0.3% over the same period last year.

In November, the national industrial producer price (PPI) fell by 2.5% year-on-year, a decline of 0.4 percentage points narrower than the previous month, and a month-on-month increase of 0.1% from a decline of 0.1% in the previous month; the purchase price of industrial producers fell by 2.5% year-on-year, a month-on-month decrease of 0.1%. 1-11 On average, the ex-factory price of industrial producers fell by 2.1% compared with the same period last year, and the purchase price of industrial producers fell by 2.2%.

Food price growth fell, driving CPI growth to narrow year-on-year in November

In November, the year-on-year increase in CPI narrowed by 0.1 percentage points from the previous month to 0.2%, down 0.6% month-on-month, and the decline expanded by 0.3 percentage points from the previous month, which was lower than market expectations. According to estimates, among the 0.2% year-on-year CPI change in November, the impact of the hikes was about 0.1 percentage points, and the new impact of price changes this year was about 0.1 percentage points.

The agency believes that against the background of a sharp decline in the base in the same period last year, the year-on-year increase in CPI in November still fell back from the previous month, mainly driven by the fall in food price increases.

Data from the National Bureau of Statistics showed that food prices rose 1.0% in November, down 1.9 percentage points from the previous month. Among them, the prices of pork and fresh vegetables rose by 13.7% and 10.0% respectively, and the increases both declined; the prices of fresh fruits fell from a 4.7% increase in the previous month to a 0.3% decline; the prices of beef, mutton, edible oil, poultry and grain fell between 1.1% and 13.5%.

From a month-on-month perspective, the seasonal decline in food prices dragged down the CPI decline in November by 0.3 percentage points from the previous month.(Food prices fell by 2.7% in November, which exceeded the average level of the same period in the past ten years by 2.5 percentage points.) Dong Lijuan, chief statistician of the Urban Department of the National Bureau of Statistics, pointed out that in November, the national average temperature was the highest in the same period in history since 1961, and the cold air process was too small, which is conducive to the production and transportation of agricultural products. Most of the prices of fresh food in food have dropped seasonally. Among them, the prices of fresh vegetables, pork, fresh fruits and aquatic products have dropped by 13.2%, 3.4%, respectively. 3.0% and 1.3%, which together affected the CPI decline by approximately 0.46 percentage points month-on-month, accounting for approximately 80% of the total CPI decline.

Wang Qing, chief macro analyst of Orient Jincheng, said that pork prices fell month-on-month in November, mainly due to the increase in the number of second-fattened pigs. However, due to the sinking price base in the same period last year, the year-on-year increase in pork prices in the month did not change much.

In November, non-food prices turned flat from a 0.3% decline in the previous month. Energy prices fell 3.8%, a decline of 1.3 percentage points from the previous month, with gasoline prices falling 8.2%. Wang Qing pointed out that international crude oil prices fell slightly in November, and domestic refined oil prices were slightly lowered once. However, driven by the lower base in the same period last year, the year-on-year decline in refined oil prices narrowed in November, but it had limited effect on the year-on-year increase in overall CPI.

Zhou Maohua, a macro researcher at China Everbright Bank's Financial Markets Department, believes that the overall low prices in November reflected the overall weak domestic market demand and relatively sufficient supply. However, monthly price fluctuations will not affect the overall price recovery trend. The main reason is that domestic consumption and demand are expected to gradually pick up, the pig market has basically returned to balance, prices are expected to maintain steady growth, and the impact of domestic macro policies on consumer demand and prices is expected to gradually emerge. However, the price growth rate is relatively moderate, mainly due to the continued deflation of international commodities, abundant supply in the domestic market, and fierce competition in the industry, which still have a certain restraining effect on prices.

The policy was effective. In November, the PPI turned from a month-on-month decline to a higher level, and the year-on-year decline narrowed.

Dong Lijuan pointed out that in November, a series of stock policies and incremental policies worked together, and domestic demand for industrial products recovered. PPI turned from a month-on-month decline to a month-on-month increase, and the year-on-year decline narrowed.

In the same month, the PPI turned from a decline of 0.1% in the previous month to a rise of 0.1%. After a lapse of five months, it returned to positive month-on-month. The PPI fell by 2.5% year-on-year, and the decline narrowed by 0.4 percentage points from the previous month, ending the previous three months of year-on-year decline. Expanding trend.

From a year-on-year perspective, the price of means of production fell by 2.9% in November, a decline that narrowed by 0.4 percentage points from the previous month; the price of means of living fell by 1.4%, a decline that narrowed by 0.2 percentage points. On a month-on-month basis, the price of means of production rose by 0.1%, the same increase as the previous month; the price of means of living changed from a decrease of 0.4%.

Zhou Maohua believes that the marginal improvement in industrial product prices in November exceeded expectations year-on-year, with the main contribution coming from the improvement in prices of upstream extractive industries and raw materials industries, the improvement in prices of terminal durable consumer goods, and the low base effect. Reflecting that the effects of a package of macro policies such as domestic equipment renewal and consumer goods replacement are gradually emerging, the supply-demand relationship in the industrial market is gradually improving. However, overall, industrial products continue to face problems such as weak demand, low prices, and production cost pressures.

Wen Bin, chief economist of Minsheng Bank, also pointed out that the decline in international crude oil prices has led to a decline in prices in oil-related industries. Affected by factors such as changes in the international economic environment after Trump came to power and the vigorous promotion activities carried out by domestic companies, the prices of some equipment manufacturing industries have declined. As a result, although the PPI has turned positive month-on-month, it is still lower than the historical average for the same period.

Prices are expected to improve slightly during the year

Looking forward to prices during the year, Wang Qing believes that with the weakening of the drag effect of falling food prices, as well as the continued effectiveness of existing policies such as supporting the replacement of durable consumer goods, coupled with the recent continuous recovery of the property market, consumer demand will pick up further. It is expected that prices will rise in December. The momentum will improve, with CPI expected to turn from negative to positive month-on-month, and CPI growth is expected to rise to around 0.4%.

In terms of food prices, Wen Bin believes that when meat demand increases in winter, pork prices will rebound seasonally. Coupled with a further drop in temperature may affect the production, storage and transportation of fresh vegetables, fresh fruits and other products, which is expected to push up food prices.

However, Wen Bin also pointed out that the base rose in the same period last year, combined with the fact that international energy prices may fall as global demand weakens, and the CPI increase will be limited.

Looking forward to the trend of PPI in the next stage, Wen Bin said that due to the slowdown in manufacturing in major developed countries and weakening global demand, global commodity prices are expected to fall overall. However, as incremental policies gradually take effect, the market supply and demand relationship has been marginally repaired. Coupled with Trump's accelerated cabinet formation,"grabbing exports" may be advanced, which is expected to push domestic industrial product prices back. It is expected that the PPI decline will narrow year-on-year, but it will take time to get out of the negative range.

Wang Qing believes that PPI is expected to turn negative again slightly month-on-month in December. However, as the base continues to sink in the same period last year, it is expected that the year-on-year decline in PPI will further converge to around 2.3%. Whether PPI can turn positive faster year-on-year in 2025 will mainly depend on the effect of this round of incremental policies, of which real estate support policies have the greatest impact. At the same time, we need to focus on the impact that changes in the foreign trade environment and fluctuations in the export of industrial manufactured goods may have on domestic industrial product prices next year.

From a policy perspective, Zhou Maohua believes that domestic prices maintained a moderate upward trend in November, and there is a process for the release of the effects of domestic macro policies. Overall, the current sluggish domestic prices are consistent with weak effective demand. Macropolicies are stabilizing effective demand and promoting supply and demand. There is still a role to play in the virtuous cycle. In addition, with the low price environment and the shift in external policies, domestic policies are expected to continue to remain independent, and there is sufficient room for conventional policy tools such as RRR cuts and interest rates.

"At present, promoting a reasonable recovery in prices has become an important consideration for the central bank's monetary policy. It is expected that monetary policy will continue to remain loose and coordinate with fiscal policies and other policies to boost household consumption, expand domestic demand, reverse market entities 'expectations, and enhance endogenous economic power." Wen Bin said.