20231211-招银国际-CPI_at_record_lows_calling_for_enhanced_policy_support_7页_845kb

Summary of CPI and PPI Analysis in China (Dec 2023)

CPI Data

• November 2023 CPI growth declined to -0.5% YoY, below market expectations, primarily due to food and energy price drops and subdued domestic demand.
• Food prices fell sharply, with pork prices declining 31.8% YoY, contributing to the drag on CPI.
• Core CPI remained flat at 0.6% YoY, but MoM growth dropped to -0.3%, indicating persistent weakness in durable goods and services demand.
• Seasoally adjusted declines exceeded normal trends, signaling weak aggregate demand.

PPI Data

• November 2023 PPI growth fell to -3.0% YoY, worsening due to plummeting energy prices, particularly crude oil and coal mining, and overcapacity in manufacturing.
• MoM changes showed a 0.3% decline, reflecting ongoing inventory cycle pressures and weaker PMI indicators.
• Domestic overcapacity and high input costs continue to plague industries, exacerbating deflationary pressures.

Economy Outlook and Policy Implications

• The drag from deflation suggests weak aggregate demand, calling for additional policy loosening, including monetary easing (e.g., potential RRR cuts and lower deposit rates) and more proactive fiscal measures.
• Forecasted CPI growth for 2023 is revised down to 0.3% from 0.4%, while PPI remains at -3% YoY; 2024 is expected to see a mild reflation due to base effects and policies, with CPI growth at 1.4% and PPI at 0.3%.
• Recovery may be hindered by ongoing property market issues and weak business confidence, with infrastructure investment and credit expansion as key areas for policy support.
• Factors supporting gradual improvement in 2024 include lower crude prices and warm weather, but domestic demand remains subdued.