China November Consumer Inflation Eases to 2.4 Pct

China's consumer price index (CPI), the main gauge of inflation, rose at a slower annual rate of 2.4 percent in November, the National Bureau of Statistics (NBS) said in Beijing on Thursday.

Rises in the consumer price index (CPI) slowed for seven straight months because of the sharp fall in commodity prices on the world market and sluggish global demand amid the financial crisis.

The figure, compared with 4 percent in October, 4.6 percent in September, 4.9 percent in August and a nearly 12-year-high of 8.7 percent in February, was broadly in line with most forecasts.

The price of food, which accounts for more than a third of the CPI calculation and has been the main driver behind inflation since last year, climbed 5.9 percent in November from a year earlier, down from 8.5 percent in October and 9.7 percent in September. Prices of non-food items edged up slightly by 0.6 percent.

In the first 11 months to November, the inflation indicator rose 6.3 percent year-on-year: 6.0 percent for urban areas and 6.9 percent for the countryside, the NBS said.

Zuo Xiaolei, China Galaxy Securities chief economist, said the inflation reading last month was within expectation.

"The price of food rose just by 5.9 percent last month. In the past months, it jumped by as much as 10-20 percent. The growth of food prices has decelerated significantly," she told the Chinese financial website Hexun.com.

"In addition, the influence of a tail-raising factor is insignificant. It has something to do with China's policy adjustments before," she said.

The tail-raising factor refers to the influence of price changes last year on the year-on-year figures this year.

China had been under inflationary pressure between late 2006 and early this year, which forced the government to take a slew of measures to curb inflation. In 2007, the CPI rose 4.8 percent.

Zuo said that in the past few months lower prices of commodities and raw materials such as oil, corn and soybean on the international market, which resulted in a lower producer price index (PPI), also contributed to a lower CPI increase last month.

The NBS said Wednesday that China's PPI, a measure of inflation at the factory gate, decelerated sharply to an annual rise of 2 percent in November. It was the slowest pace of increase the PPI since May 2006.

DEFLATION LOOMS?

Zuo forecast that China's CPI would edge down further in December because there would be no tail-raising factor this month and prices of most products would continue their downward movement.

For the entire 2008, she said inflation would rise by less than five percent, which was close to the 4.8 percent target set by the government earlier this year.

As the inflation growth deceleration gathered pace, Zuo said worries over deflation were reasonable.

"Therefore, we need to stimulate the economy. If the macroeconomic policies push forward economic growth successfully, deflation would not inflict pains on the economy in a significant way. Without proper policy support, deflation would be highly possible," she said.

The Chinese government has churned out a series of aggressive measures to stimulate the world's fourth largest economy. In one of the most significant moves, China on Nov. 9 announced a stimulus package estimated at 4 trillion yuan (586 billion U.S. dollars), to be spent over the next two years.

Earlier on Wednesday, the three-day Central Economic Work Conference, which gathered the country's top leaders, ended in the Chinese capital with a pledge to maintain stable, healthy growth next year through domestic demand expansion and economic restructuring.

China's economy slowed sharply in the third quarter because of slowing export and investment growth. The gross domestic product grew at an annualized rate of 9 percent in the third quarter, down from 10.1 percent in the second quarter and 10.6 percent in the first quarter.