Consumer inflation rises to its highest level this year

China’s consumer inflation rose in October to its highest level this year with producer price inflation remaining at a high level for the past six months, according to official data.

The Consumer Price Index, a main gauge of inflation, rose 1.9 percent year on year, 0.3 percentage points higher than in September, the National Bureau of Statistics said yesterday.

That exceeded a market forecast of 1.8 percent but remained under the 2 percent mark for the ninth consecutive month.

Meanwhile, the Producer Price Index, measuring the cost of goods at the factory gate, rose 6.9 percent year on year, the same as in September which was the highest since March.

That compared with market expectations of 6.5 percent.

Sheng Guoqing, a bureau analyst, said a slower decline in food prices last month helped sustain consumer inflation.

Food prices fell 0.4 percent year on year, compared with September’s 1.4 percent, bureau data showed. Pork prices fell 10.4 percent year on year, lowering the CPI reading by 0.28 percentage points.

Rises in non-food prices remained at 2.4 percent year on year, led by a 7.2 percent increase in the cost of medical services.

Excluding food and energy prices, the core CPI increased 2.3 percent year on year last month, the same as in September. 

Economists believe the index, free from factors vulnerable to short-term supply changes, better reflects long-term price trends.

In the first nine months of the year, the CPI climbed 2.1 percent from a year earlier. The official target for the year is 3 percent.

Commenting on the PPI, Sheng said price increases accelerated in the paper, chemicals and non-metal mining industries, while slowing in the metal, coal, and oil and gas sectors.

On a month-on-month basis, the PPI rose 0.7 percent in October.

Jiang Chao, a researcher with Haitong Securities Co, said price transmission from industrial sectors to consumers remained subdued, squeezing the profitability of downstream companies.

He said the PPI may decline, dragged by weaker real estate and infrastructure construction activity, and monetary policies will remain neutral to balance inflation and economic growth.

Industrial Securities Co analysts wrote in a note that they expected consumer inflation to pick up to above 2.5 percent after next February due to a low base this year. The capital market may be more volatile in 2018 due to rising concerns over inflation, the note said.

Earlier economic indicators for October showed moderated expansion in the manufacturing sector as the official Purchasing Managers’ Index fell to 51.6 from September’s year high of 52.4.

Growth of exports and imports both slowed slightly to indicate an uncertain outlook next year.

Economists expect China to record slower economic growth in the fourth quarter of the year but should have no problem reaching the official annual growth target of 6.5 percent.