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China's Dec. PPI growth decelerates to two-year low

(Xinhua)

13:10, January 12, 2012

BEIJING, Jan. 12 (Xinhua) -- Growth in China's producer prices further decelerated in December 2011, marking the slowest pace in two years on waning demand.

China's Producer Price Index (PPI), a main gauge of inflation at the wholesale level, rose 1.7 percent year-on-year in December, the National Bureau of Statistics (NBS) said Thursday.

Easing further from November's 2.7-percent growth and October's 5-percent growth, the rate is slightly higher than market estimates of around two percent.

On a month-on-month basis, China's December PPI fell 0.3 percent from November, the NBS said.

Producer purchase prices grew 3.5 percent year-on-year in December and were down 0.4 percent from a month ago, said the NBS.

The full-year PPI climbed 6 percent year-on-year in 2011, while producer purchase prices rose 9.1 percent from a year earlier.

Analysts expect the pullback to ease temporarily, as upcoming holiday demand will drive prices higher in the short term, although the downward trend is likely to last amid the global economic downturn.

"As long as there is not a significant easing of China's monetary policy, the downward trend will not change," read an analysis by Bocom International.

Analysts warned that any change in market sentiment will influence the trend.

"Though investors' confidence remains low, possible government measures to spur the economy could boost prices at all levels," said Chen Kexin, an analyst with the distribution productivity promotion center of China Commerce.

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