China's factory inflation eases to lowest since November 2016

[BEIJING] China's factory inflation slid to the lowest level since November 2016 last month amid slowing output and higher year-ago base comparisons.

The producer price index rose 4.9 per cent in December from a year earlier, versus a projected 4.8 per cent rise in a Bloomberg survey and 5.8 per cent in November. The consumer price index climbed 1.8 per cent, the statistics bureau said on Wednesday, compared with a median forecast of 1.9 per cent.

Easing factory prices could reduce incentive for the People's Bank of China to raise borrowing costs, a move that would alleviate pressures on the bond market amid efforts to curb the pace of debt growth.

Policymakers said during an annual gathering in Beijing that they were taking a three-year approach to winning "critical battles" against financial risk, pollution and poverty, and signalled that monetary policy will remain "prudent and neutral".

A "high-base factor is a main reason contributing to the easing of PPI," said Tommy Xie, an economist at OCBC in Singapore.

"At least in the near term, policymakers won't be under pressure to raise interest rates."

BLOOMBERG