18 Dec 2017
China Sourcing Update: Major Price Indicators (Nov 2017)
1. CPI growtheasesin November
The year-on-year growth rate of China’s consumer price index (CPI) went down from 1.9% in Octoberto1.7% in November, which was lower than market expectations (see exhibits 1 & 2).
The reason for the moderation in the CPI growth in November was that a larger fall in food prices outweighed a faster increase in non-food prices in the month. The year-on-year growth in the food component in the CPI went down from minus 0.4% in October to minus1.1% in November, due largely to a sharp fall in vegetable prices. Meanwhile, the year-on-year growth in the non-food component edged up from 2.4% in October to 2.5% in November.
Going forward, the food deflation is expected to continue in the near future, given the softness in pork prices and vegetable prices; meanwhile, the non-food inflation is likely to remain high in December as the recent rise in domestic ex-factory prices will be translated into higher non-food prices. All in all, we expect the CPI growth to stay around the current level in December. Afterwards, the CPI growth is likely to drop in January 2018 given a higher comparison base in January 2017, which coincided with the Chinese New Year this year.
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