Inflation in China falls below two percent in November

China’s consumer inflation slowed further in November as it fell below two percent for the first time since March, official data showed Friday, providing authorities room to unveil fresh measures to kickstart the stuttering economy.

Last month saw a slew of gloomy figures for the world’s second-largest economy as a hardline zero-Covid policy hammered businesses and supply chains, and dampened consumption.

In a further sign of weakening demand, prices paid at factory gates fell for the second month in a row.

The main gauge of inflation, the consumer price index (CPI), rose 1.6 percent on-year last month, down from 2.1 percent in October, according to the National Bureau of Statistics (NBS).

Food prices in China rose moderately in November by 3.7 percent year-on-year, though pork rose by 34.4 percent. The cost of fresh vegetables decreased by 21.1 percent.

China has been relatively unaffected by a global surge in food prices since Russia’s invasion of Ukraine in February.

But authorities are keeping a close eye on pork, widely consumed in China, to avoid popular discontent.

“In November, due to the domestic epidemic, seasonal factors, and a higher base of comparison in the same period last year, CPI turned from rising to falling month-on-month and fell back year-on-year,” said Dong Lijuan, a statistician at the BNS.

Producer prices contracted 1.3 percent in November, the same as in October, owing to weak demand and the imposition of Covid containment measures.

Despite authorities loosening zero-Covid restrictions, travel between provinces remains complicated and health Covid policies continue to vary from place to place.

The figures should provide the People’s Bank of China some leeway to introduce more stimulus measures for the economy, having already lowered the number of cash lenders must keep in reserve, allowing them to provide more loans.

Friday’s data indicated “economic momentum continued to weaken”, said Zhang Zhiwei, at Pinpoint Asset Management, according to Bloomberg News.

“I expect the government will do more to boost the market and household confidence. The fast pace of reopening indicates the government’s sense of urgency.”

Chinese leaders have set an annual economic growth target of about 5.5 percent, but many observers think the country will struggle to hit it, despite announcing a better-than-expected 3.9 percent expansion in the third quarter.