(Bloomberg) — China’s factory inflation may have peaked and started slowing in November, providing some relief for companies and making room for the central bank to do more to support the economy. 

According to a median estimate based on a survey, economists predict that the producer price index will have increased 12.1% in November compared to a year ago. This is slower than October’s record of 13.5%. The projected growth would be second-fastest in 26 years, despite the decline.

Stagflation worries have been exacerbated by China’s recent rapid inflation. This is despite a slowdown in domestic economic growth and concerns over persistent global inflation. It also increased the challenge for the People’s Bank of China on how to stimulate growth without adding to inflationary pressures, so slower price rises may make it easier to add stimulus.

The central bank acted to release 1.2 trillion yuan ($189 billion) into the economy, announcing Monday it would reduce most banks’ reserve requirement ratio by 0.5 percentage point from next week. While the central bank said this wasn’t the start of an easing cycle, financial markets are showing some expectation of further action.

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The Communist Party’s top leaders also indicated earlier this week that their focus for the coming year is stabilizing macroeconomic conditions and signaled an easing of some property curbs next year, as a real estate downturn and sporadic virus outbreaks weigh on the economic outlook.

Price increases are slowing down, indicating that government policies to improve commodity supplies and reduce rising costs have had some impact. Although iron ore prices have begun to rise again in December, they continued to fall in November. The easing of the power crisis also assisted in lifting factory output caps which helped raise prices.

The falling inflation trend can also be seen in the price sub-indexes of China’s manufacturing purchasing managers index. The November manufacturing input prices dropped to 52.9, from 72.1 in November. However, the output prices plummeted to 48.9 (from 61.1). 

According to forecasts, consumer inflation will have increased faster. This increase could be as fast as 2.5% (from 1.5% in Oct) and possibly reaching its highest level since mid-2021. This has been due to rising food costs, including fruit and vegetable prices. However pork is becoming more costly.

Read more: China’s Falling Pork Prices Mask Rapid Inflation Gains

A deflationary effect from pork prices is likely to continue due to low levels of last year’s base. Because it doesn’t include more volatile food and fuel prices, the core CPI rise is not as dramatic. However, Covid-19 outbreaks and other irregularities will continue to impact services consumption. 

At 9:30 am on Thursday Beijing time, the National Bureau of Statistics will release November’s inflation data. 

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