Customers select pork at a supermarket in Fuyang, in eastern China's Anhui province on May 10, 2016. STR | AFP | Getty Images

China's consumer inflation climbed to nearly eight-year peaks in November as pork prices doubled, but factory-gate prices remained in the red, adding to uncertainty over whether the manufacturing sector is bottoming out as trade risks persist. Beijing is under pressure to unleash more stimulus to boost industrial activity, but high inflation ahead of the Lunar New Year may be a headache for policymakers trying to shore up growth that has slipped to the lowest in nearly 30 years. Consumer prices in November rose 4.5% on year, the fastest pace seen since January 2012, driven mostly by a surge in pork prices as African Swine Fever ravaged the country's hog herds, National Bureau of Statistics (NBS) data showed on Tuesday. That topped analysts' expectations of 4.2% and October's 3.8% rise. However, core inflation — which excludes food and energy prices — stayed largely subdued. "The high CPI would surely have an impact on China's monetary policy, but overall we don't see risks of inflation spike across the board, so current monetary policy with a loosening bias will not be significantly affected," said Liu Xuezhi, an analyst with Bank of Communications.

In contrast, the producer price index (PPI), seen as a key indicator of corporate profitability, fell 1.4% on year, falling for the fifth month in a row. That compared with a 1.5% drop forecast in a Reuters poll and 1.6% fall in October. Price declines for manufactured goods suggest demand remains weak, despite hints of improvement in recent factory surveys. "There are few signs of a pick-up in demand-side price pressures," said Julian Evans-Pritchard, senior China economist at Capital Economics. "Higher prices of consumer goods in the PPI basket, one component of which is food, were more than offset by more pronounced declines in the prices of industrial goods." Weak prices were mainly seen in oil and gas extraction and chemical fiber manufacturing sectors. Beijing and Washington are negotiating a first phase trade deal aimed at de-escalating their trade dispute but they continue to wrangle over key details. But even if a deal is struck, economic growth is expected to continue slowing in the current and coming quarters, however. Government advisers said China should lower its growth target to around 6% in 2020 as the trade dispute remains unresolved. China has rolled out a series of measures to support growth, including reductions in market interest rates, but the government has insisted it will not resort to "flood-like" stimulus, however.

CPI remains elevated

Consumer inflation was driven largely by a continued surge in pork prices and other meats after the African Swine Fever killed a large portion of China's pigs. Wholesale pork prices have seen a slight reprieve in November but remain elevated from a year earlier. The statistics bureau said pork prices more than doubled year-on-year in November.