China: Inflation Drops Dramatically but Food a Problem

December 9th, 2011
in econ_news

China-inflation-foodEconintersect:  The latest inflation numbers from the National Bureau of Statistics indicate that China's inflation rate (CPI) fell to 4.2% annual rate in November.  This is down sharply from 5.5% in October and from a high of 6.5% in July.  The PPI, a major measure of inflation at the wholesale level, dropped to an annual rate of 2.7%, almost half of the rate a month earlier.  The sharply lower inflation rate announcement comes just one week after the first contraction in manufacturing in almost three years was announced and reserve requiremnents for banks were cut.  See GEI NewsClick on picture for larger image.

Follow up:

By far the largest of the eight components of CPI was Food which was up more than 10% year-over-year.  Residence was up 6.3% and Healthcare and Personal Care gained 3.2%.  The other five components of CPI were all up less than 2% and two, Transportation and Clothing, actually declined slightly.

The Shanghai Daily said that the reserve requirement cut had released 400 billion yuan ($62.9 billion) into the economy to stimulate economic growth.  With the inflation rate approaching the governments 4.0% target, further monetary easing may be forthcoming.

Sources: Shanghai Daily from news brief found on Econintersect Asia/Pacific Newspaper page and GEI News

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