(Bloomberg) -- China’s consumer inflation slowed in September, driven by a moderation in food price gains.
- The consumer price index rose 1.7% last month from a year earlier, following a 2.4% gain in August, the National Bureau of Statistics said Thursday. The median forecast was for a 1.9% increase.
- The producer price index registered a 2.1% decline, after a 2% drop in August.
Key Insights
- Pork prices, a key element in the country’s CPI basket, rose 25.5% after gaining 52.6% the previous month. The moderation has some effect on lowering inflation for households, but base effects are also present -- prices of the meat hit record levels during the peak of the African Swine Fever pandemic last year.
- Core inflation, which removes the more volatile food and energy prices, remained steady at 0.5%. Sluggish core price gains may signal weak underlying activity in the economy.
- China’s economic recovery has stabilized recently thanks to robust export growth and improving domestic demand as coronavirus cases have largely been brought under control at home. The September activity data and third-quarter GDP to be released on Monday will provide some glimpse into how sustainable the rebound is.
- CPI is expected be fall below 1% in the final quarter, Tommy Xie, an economist at Oversea Chinese Banking Corp. in Singapore , said before the data was released. That could pose a challenge for the growth recovery in the sense that it means China’s real interest rates become even higher compared to the U.S., so China may have to lower the yield gap “for two benefits: good for recovery and containing capital inflows and ease pressure for the yuan appreciation.”
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