China: Consumer prices flatline in September; producer prices continue to decline
No consumer inflation was recorded in September, below August’s 0.1% and undershooting market expectations of +0.2%. Lower prices for food and transport were offset by higher prices for culture and entertainment. Accordingly, the trend pointed down slightly, with annual average inflation coming in at 0.8% in September (August: 1.0%). Lastly, consumer prices increased 0.20% over the previous month in September, after August’s 0.30% increase and also undershooting market expectations.
Meanwhile, producer prices fell 2.5% on an annual basis in September, which was a smaller drop compared to August’s 3.0% decrease.
Price pressures are expected to rise somewhat in Q4 on a more favorable base effect, but will be muted nonetheless amid ongoing economic slack, leaving the door open to more rate cuts.
On the monetary policy implications of the latest data, United Overseas Bank’s Ho Woei Chen said: “Overall, the weak inflation and growth backdrop lends support to further monetary policy easing. We keep our call for a further 10 bps cut to the 1Y LPR and 20 bps cut to the 5Y LPR in 4Q23 to bring the rates to 3.35% and 4.00% respectively by year-end.”