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China inflation edges higher as food costs rise

Chinese inflation rose moderately in November in a further sign of solid domestic demand in the world’s second biggest economy.

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China’s CPI inflation for November increased to 1.5% year on year in compare to 1.3% in October.

Food prices advanced 2.3 percent after climbing 1.9 percent in the prior month.

Output prices of production materials fell 7.6 percent in November, contributing 5.8 percentage points of the PPI drop, while those of consumer goods edged down 0.4 percent during the period.

“We expect inflation to rise going into 2016”, Julian Evans-Pritchard, China economist at Capital Economics in Singapore, wrote in a report. Likewise, non-food items are also increasing despite lower energy prices.

Even if price pressures simply hold steady, both consumer and producer prices will still pick up markedly over the coming months, as the sharp falls in the price of oil and other commodities at the end of a year ago drop out of the base for comparison. In a bid to avert a sharper economic slowdown, China’s central bank has already cut interest rates six times since last November and reduced the amount of cash that banks must set aside as reserves.

Last month, the producer price index, which measures wholesale inflation, plunged 5.9% year-on-year last month, marking the 45th straight month of decline and showing continued weak market demand.

The fall in the gauge of factory-gate prices came in better than economists’ median forecast of a 6.0 per cent decline.

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The PBOC has eased policy in late June, late August and late October of this year, suggesting further easing may arrive later this month should the recent pattern be maintained.

The Consumer Price Index rose at an annual rate of 1.5 per cent in line with expectations