China's consumer inflation declines in September

China’s consumer inflation slowed down in September as domestic demand remained weak, data released on Wednesday showed.

According to China’s National Bureau of Statistics, the consumer price index rose 1.6% year-on-year in September compared with a 2% increase in August and with analysts’ expectations for a 1.8% gain.

The figures fell well below the People’s Bank of China’s 3% target and analysts believe Beijing will be forced into implementing more stimulus measures if China is to reach its target of about 7% this year.

“The weak inflation data, along with other disappointing releases recently such as yesterday’s trade figure, makes more monetary easing and fiscal stimulus very likely if China is to achieve something close to the 7% growth it targeted at the beginning of the year,” said Oanda’s senior market analyst Craig Erlam.

The drop in consumer price inflation was largely attributed to a decline in food price inflation, which declined 2.7% year-on-year compared with a 3.7% fall in August, driven lower by a sharp decline in pork price inflation, which fell 2.2 percentage points to 17.4%.

Non-food inflation fell 1% year-on-year compared with a 1.1% decline in the previous month

Meanwhile, China’s producer price index remained deep in negative territory in September, as it declined 5.9% year-on-year last month, falling flat compared to August and in line with analysts’ expectations.

“Global commodity price deflation is still weighing on the price of industrial inputs, which are heavily weighted in the index,” said analysts at Capital Economics.

“We aren’t overly concerned by this since with the price of domestic goods holding up better, many firms should actually benefit from these lower input costs.”