(Yicai Global) Dec. 10 -- China's official producer price index grew slower again last month, falling to a two-year low.

The PPI in November was 2.7 percent higher than the same month a year earlier, marking the slowest annual gains in a single month since October 2016, according to data published yesterday by the National Bureau of Statistics. The figure, which measures the price of goods at the factory gate, was 0.6 point lower than a month earlier.

The index fell 0.2 percent on the month, compared to a 0.4 percent rise in October and marking the first dip in seven months.

Carryover from last year made up 0.8 percentage points of the annual growth in November, while inflation this year added the remainder, said Sheng Guoqing, a senior statistician at the bureau's urban surveys department.

The PPI is likely to fall further without any significant improvement in demand, Liu Zhe, deputy director of the Wanbo New Economic Research Institute, told Yicai Global. He believes that rising raw material prices in the mid- and downstream sectors should now continue to cool.

Lian Ping, chief economist at the Bank of Communications, agrees. He envisions prices continuing to fall next year, with average gains in PPI and CPI of less than 2 percent. The PPI in some months may even be negative, he added, saying mild fluctuation with little risk of inflation will allow for flexible macroeconomic policies.

Consumer Prices

The CPI rose 2.2 percent annual in November, 0.3 percent slower than a month earlier, and fell 0.3 percent on the month after a 0.2 percent gain in October.

About 0.3 percent of that was carried over from last year, said Sheng, while inflation this year made up the remainder.

The vegetable market had sufficient supply in November, and some pig breeding farms slaughtered pigs sooner to avoid the impact of Africa swine fever, Sheng added. This limited the rise in food prices, and non-food prices -- such as for gasoline, diesel, plane tickets and other travel expenses -- also declined, he said.

Non-food prices in November fell for the first time in seven months, and the annual increase was the lowest since the second quarter, added Lian, who identified dramatic reductions in China's refined oil prices last month as the main cause.

"The falling petroleum price will cause the CPI to fall in future as manufacturers' bargaining power stays weak," said Liu, who pointed out that the sub-index for supply and demand showed that demand has remained stable.