Industrial prices in China remained subdued in November, highlighting ongoing concerns about the region's economic recovery from the pandemic era. The producer price index (PPI) for China fell 2.5% year-on-year in November, although the index registered a slight increase of 0.1% compared to October, as reported by the National Bureau of Statistics (NBS) on Monday.
China's PPI reflects the prices of industrial goods at the factory gate when sold to major buyers, distinguishing itself from the consumer price index (CPI), which tracks retail prices. Often, the PPI serves as an early indicator of future movements in the CPI since retailers tend to adjust prices based on changes in their cost structures.
Over the first 11 months of 2024, the average PPI in China was down by 2.1% compared to 2023, according to the NBS. Notably, industrial buyers and sellers experienced softer prices in November. Specifically, the PPI for ferrous materials plummeted by 7.1% year-on-year, while fuel power prices decreased by 6.5%, and chemical raw materials prices declined by 5%, as detailed by the NBS.
The weak industrial pricing landscape, combined with the ongoing struggles in the property sector, poses significant challenges for China's leadership. Fitch Ratings reported, on Monday, that Beijing is targeting a 5% growth rate for the nation's gross domestic product (GDP) but faces considerable domestic issues, particularly due to a sluggish real estate market and potential higher tariffs on goods destined for the U.S.
stemming from the pending Trump Administration policies. Fitch has revised its GDP growth forecast for China in 2025 down to 4.3% from 4.5% and for 2026 down to 4.0% from 4.3%, citing geopolitical uncertainties and the implications of upcoming tariffs and exports. The agency noted that, "The scale of these revisions is tempered by an assumption that fiscal policy will be eased more aggressively in China.".