China CPI jumps back in September

The cost of living in China snapped back in September as food price inflation heated up while factory gate prices moved out of deflation.

China´s headline consumer price index advanced at a 1.9% year-on-year clip in September, after a rise of 1.3% in August, as food price gains accelerated to a 3.2% year-on-year clip from 1.3%.

Non-food price increases also quickened to a 1.6% pace - a two-year high - up from 1.4% in the month before.

Economists had forecast a gain of 1.6% in headline CPI.

In parallel, producer prices rose at a 0.1% year-on-year pace after declining by 0.8% in August, with a rise in industrial commodity prices responsible for the move.

"This is the first year-on-year increase [for producer prices] in over four years and should ease any lingering concerns about deflation," Julian Evans-Pritchard, China economist at Capital Economics, said in a research report sent to clients.

Evans-Pritchard said further declines in pork prices would compensate for higher non-food inflation going forward.

"The upshot is that inflation is unlikely to become a major concern for policymakers this year, allowing them to focus on more pressing issues such as financial stability and structural reform," Evans-Pritchard said.

"Inflation data overnight points to further easing of deflationary pressures in China . In combination with concern over bubbling house prices and rising financial risks, it puts monetary policy firmly on hold.

"We expect monetary policy to be on hold for now but look for renewed easing in 2017 as growth tapers off again. The risk to our view is that China is increasingly using regional measures to control the housing market as there is a very large dispersion across the country," analysts at Danske Bank chipped in.