China September inflation at seven-month high, factory deflation eases

NDTV Profit Desk

14 Oct 2013, 08:45 AM IST

China's annual consumer inflation crept up to a seven-month high of 3.1 per cent in September from 2.6 per cent in August, official data showed on Monday, limiting the scope for the central bank to manoeuvre to support the economy.

The inflation rate was higher than a median forecast of 2.9 per cent in a Reuters poll, but was still below the official target of 3.5 per cent target for 2013.

Month-on-month, consumer prices rose 0.8 per cent, the National Bureau of Statistics said, bigger than a rise of 0.5 per cent expected by economists.

"We expect CPI inflation to rise further in Q4 and see rising risks that it may rise above 3.5 per cent for some months in 2014," said Zhiwei Zhang, China economist at Nomura in Hong Kong.

"The rise of CPI inflation leaves little room for policy easing as benchmark deposit rate is only 3 per cent."

At the same time, analysts see little risk of a near-term tightening given inflation was below the full-year target and because the world's second-largest economy faces a tough global environment.

China's exports dropped 0.3 per cent in September from a year earlier, against expectations of a 6 per cent rise, data showed on Saturday.

"September CPI inflation gained more momentum on seasonal factors and a low base effect from last year," said Li Huiyong, an economist at Shenyin & Wanguo Securities in Shanghai.

"But we think the inflation situation is still under well control and will not be a concern this year, especially when the economy is struggling with over-capacity problems."

The statistics bureau said factory-gate deflation eased further in September. Producer prices fell 1.3 per cent from a year earlier, a smaller fall than the 1.4 per cent expected by the market and the 1.6 per cent drop in August.

Still, producer prices have fallen for 19th consecutive months.

China's annual economic growth is forecast to have accelerated to 7.8 per cent in the third quarter from 7.5 per cent in the second quarter, the Reuters poll showed.

Beijing has a growth target of 7.5 per cent for 2013, which would be the weakest rate in more than 20 years, and has repeatedly said it would accept slower growth as it tries to restructure the economy to be driven by consumer demand, rather than investment, credit and exports.