Inflation pressures in China are tumbling

Photo by Guang Niu/Getty Images

Inflationary pressures in China eased in September with CPI rising 1.6% from a year earlier. The figure, well below the 2% pace of August, was below expectations for an increase of 1.8%.

A sharp moderation in food inflation, up 2.7% from 3.7% in August, largely explains the decline in the headline CPI figure. Pork prices, a staple of the Chinese diet and influential on overall food price inflation, eased to 17.4% from 19.6%.

Non-food inflation also eased to 1.0% from 1.1% seen previously.

The producer price index, or PPI – a gauge of the prices of raw materials – continued to decline, falling 5.9% from September 2014. The reading was unchanged from August and in line with expectations. It was the 43rd consecutive month that producer prices have fallen.

While the weak inflationary print is reflective of a slowdown in China’s economy, it also opens the prospect for additional monetary policy easing from the PBOC in the months ahead.

Following the September CPI and PPI figures released today, China’s national bureau of statistics will also deliver monetary growth and bank lending figures later in the week.

On Monday next week the data calendar reaches its crescendo with the release of industrial production, retail sales and urban fixed asset investment figures for September, along with the most important of them all, Q3 GDP.

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