Growth in China's producer prices decelerated to the lowest pace in nearly two years as market demand fell on future economic uncertainties.

China's Producer Price Index (PPI), a main gauge of inflation at the wholesale level, rose 2.7 percent in November year-on-year, the National Bureau of Statistics (NBS) said Friday.

The reading eased significantly from October's 5-percent growth, which was expected to stay around 3.6 percent, according to previous estimations.

On a month-on-month basis, China's PPI fell 0.7 percent from October, the NBS said in a statement on its website.

Producer purchase prices grew 5.1 percent year-on-year in November and were down 0.7 percent from a month ago, said the NBS.

In the first eleven months of the year, the PPI climbed 6.4 percent year-on-year, while producer purchase prices rose 9.7 percent from a year earlier.

The sharp decline in producer prices growth was a result of a higher comparison basis in the corresponding period last year and a significant decrease in both international prices of raw materials and domestic demand, the statement said.

The lower-than-expectation PPI figure was mostly triggered by a market panic, said Chen Kexin, an analyst with the Distribution Productivity Promotion Center of China Commerce.

"Uncertainties in external markets and risk of a further recession have turned the market toward a more prudent mood," he said.

Sheng Hongqing, chief economist with Everbright Bank, said the December PPI may drop to zero or below as market demand further dips and the real economy weakens faster than expected.

Chen said there is still a possibility for a rebound in PPI in the future if market sentiment can be encouraged by more favorable news.

"But so far, there is no sign of that," he said.

China's consumer price index (CPI), a main gauge of inflation, rose 4.2 percent year-on-year in November, further weakening from 5.5 percent in October, said the NBS.

Source:xinhuanet