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China Inflation Slows; PPI On The Decline For 43 Months

China Inflation 101415

China's inflation eased in September, reflecting a slowdown in food inflation, and producer prices extended its downward trend, adding to fears of deflationary pressure amid moderation in economic growth.

Consumer price inflation slowed to 1.6 percent in September from a 12-month high of 2 percent seen in August. It was forecast to fall to 1.8 percent.

Food inflation eased notably to 2.7 percent from 3.7 percent, while non-food inflation slowed only marginally to 1 percent from 1.1 percent.

Month-on-month, consumer prices gained 0.1 percent, slower than the 0.5 percent increase seen in August.

Another report from NBS showed that producer prices fell at the weakest rate since late 2009, posting the 43rd consecutive month of decline.

Producer prices dropped 5.9 percent annually in September, the same rate of decline as seen in August and matched expectations. On a monthly basis, prices fell 0.4 percent.

Julian Evans-Pritchard at Capital Economics expects the fall in consumer price inflation to be temporary.

As the sharp falls in the price of oil and other commodities late last year begin to drop out of the base for comparison over the coming months, both consumer and producer prices are likely to pick up markedly, easing concerns over deflation, the economist said.

The People's Bank of China cut its interest rates five times since last November and reduced reserve ratio to support lending.

Inflation has remained between 0.8 percent and 2 percent this year. The government aims to achieve around 3 percent inflation this year.

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