Absolutely nothing positive from November’s inflation report from China – consumer inflation picked up to an annual rate of 1.5%, from 1.3% in October, thanks to higher food prices.
But producer prices across manufacturing remained stuck in deep deflation, contracting at an annual rate of 5.9% for yet another month and unchanged from the preceding couple of months.
In fact Chinese producer inflation has been negative now for 45 months in a row (and should be renamed Producer Price Deflation).
Six interest rate cuts and multiple reductions in bank reserve ratios (to stimulate more lending) have not helped break the deflationary hold on manufacturing (aided by the continuing slide in commodity prices, led by oil and gas, coal, metals, iron ore and rural products, such as wheat, corn and soybeans).
Consumer inflation peaked at 2% in August (thanks to higher pork prices). The country’s official ’target’ for this year is around 3%.
On a monthly basis, consumer prices were flat, compared with a 0.3% fall in October.
Trade data on Tuesday showed exports falling a worse-than-expected 6.8% from a year earlier in November, their fifth straight month of decline, while imports tumbled 8.7%, their 13th drop in a row.
But Chinese companies boosted import volumes of iron ore, copper, coal, soybeans, oil and other key products to take advantage of low prices.
Economic growth dipped to 6.9% in the third quarter, according to official statistics, dropping below the 7% official target (for this year) for the first time since the global financial crisis.
There was a glimmer of ‘good news’ from the car industry – thanks to those 50% tax cuts for cars with an engine size of 1.6 litres or smaller, passenger car sales in November jumped 17.6% – after an 11% surge in October, the month the reductions kicked off. Car sales hit 2.202 million for month, the fastest growth rate since February.
Passenger car sales – sedans, multi-purpose vehicles and sports utility vehicles – in China are now up 9.7% in the first 11 months of the year compared to a year ago, thanks to the big gains in October and November. Before October they were running flat on a year earlier.
Full details of the month’s car sales, including wholesale and commercial vehicle sales, will be out later today.
Chinese industrial production, retail sales and urban investment data will be issued on Saturday – watch for figures on the level of property investment which will tell us a lot about the health of the sector and much of Chinese industry.
