China's 2016 consumer inflation undershoots government's 3% target

China's 2016 consumer inflation undershoots government's 3% target

The producer price index (PPI) jumped 5.5 per cent last month from a year earlier, the most since September 2011, compared with a 3.3 per cent increase in November, the National Statistics Bureau said yesterday.

China's consumer inflation eased to 2.1 percent year-on-year in December, less than market expectations.

Meanwhile, China's consumer inflation remained tame last month, while reporting faster full-year growth.

Another report from the NBS showed that factory gate prices climbed 5.5 percent year-on-year in December, faster than the 3.3 percent increase seen in November and the expected rate of 4.6 percent.

It was expected to increase by 2.3%, unchanged from the pace reported in November.

On a monthly basis, producer prices advanced 1.6 percent after rising 1.5 percent a month ago.

People's Bank of China Weakens Yuan Against Dollar by 0.87% Monday
The pound is down by around 2.3% against the dollar from its year-to-date high of 1.24 printed at the end of last week. The yuan recorded a record rally 1.9% against the dollar in the days following rising from around 6.95 to 6.78.

The rebound in prices of coal, steel and non-ferrous metals helped to drive the PPI rise, the bureau said.

Only four months out of a multi-year factory deflation, the world's second-largest economy is poised to export inflation to nations around the globe through its supply chains as manufacturers squeezed by higher input costs raise asking prices.

"High commodity prices will delay the government effort to deal with over capacity", said Raymond Yeung, chief greater China economist at Australia & New Zealand Banking Group Hong Kong.

"The inflation data show China's economy ending 2016 on a strong note", Bloomberg economist Tom Orlik said, "Consumer price gains edged down, but an increase in the non-food index pointed to resilient demand".

For 2016, CPI rose 2.0 percent while PPI slid 1.4 percent.

The PBOC reaffirmed it would keep liquidity in the financial system stable while taking steps to prevent asset bubbles and financial risks in its annual work meeting for 2017.