China factory gate prices slip in October despite weak yuan

Consumer and factory gate prices in the People's Republic of China remained elevated last month, despite the recent weakening in the yuan and import tariffs, a trend that economists expected would continue.

According to the National Bureau of Statistics, the year-on-year rate of gains in headline consumer prices in China was unchanged in October from the month before at 2.5%, as expected by economists.

Producer price inflation on the other hand slipped from the prior month's pace of 3.6% to 3.3%, which was also as expected.

Economists at Capital Economics expected inflation at both the consumer and factory gate level to decline, with the latter dragged down by weaker economic conditions on the ongoing retreat in crude oil prices.

Indeed, Chinese officials had already cut domestic fuel prices once in November, the researcher said.

Capital Economics's Chang Liu said: "Inflation in the prices of the intermediate manufactured goods that make up the bulk of China's factory output is also easing alongside a weakening in economic activity."

The rate of Chinese import price gains had accelerated from May's 2.0% pace to 5.8% and the Chinese currency was forecast to continue depreciating, but not by enough to keep producer price gains from continuing to slow.

"Indeed, we think policymakers will pay more attention to evidence that underlying price pressures remain subdued and will continue to ease policy over the coming months to shore up economic activity."