The National Bureau of Statistics (NBS) is scheduled to release China’s October price data on November 9.
Analysts believe that Consumer Price Index (CPI) growth will likely stay steady or slow slightly in October due to easing support from food prices, while the year-on-year decline in the Producer Price Index (PPI) is expected to narrow as a series of stimulus policies lifted market expectations and lifted demand.
NBS data showed that China’s CPI grew by 0.4% year-on-year in September, with no change month-on-month.
For October, analysts at CICC, Golden Credit Rating, Minsheng Bank, Industrial Securities and CITIC Securities expect CPI to grow by 0.6%, 0.6%, 0.5%, 0.2%, and 0.2%, respectively, from a year earlier.
In terms of food prices, high-frequency data showed that following weaker post-festival demand and increased supply, the prices of pork and vegetables fell in October, and the year-on-year growth rate also eased, said Golden Credit Rating.
As for non-food prices, CICC believes that the consumer goods trade-in subsidy policy may continue boosting consumption, however, during the National Day holiday, China’s domestic airfares and hotel booking prices fell by about 13% and 6% year-on-year, respectively, and rental and other service prices also remained relatively weak, it said.
CITIC Securities believes that food prices which had seen faster-than-expected increase in previous months have gradually returned to normal, with pork and fresh vegetable prices falling by 7.0% and 6.6%, respectively, in October from the prior month, which may drag down the CPI.
Given that core CPI remains weak, and the high base from the same period last year, October’s CPI growth will further narrow from the previous reading, it estimated.
Golden Credit Rating noted that while CPI growth has expanded recently compared to the first half of the year, the low-price environment has not yet changed.
In the short term, the CPI’s year-on-year trend will largely depend on the strength and pace of the current round of stimulus policies and as for whether the macroeconomy can fully recover from low inflation next year, it will largely depend on when the real estate market stabilizes, it added.
In terms of PPI growth, many believe that, with stimulus policies boosting market expectations and supporting domestic demand and industrial product prices, the year-on-year decline in PPI is expected to narrow in October.
NBS data showed that China’s PPI declined by 2.8% year-on-year in September, down 0.6% month-on-month.
For October, CICC, Golden Credit Rating, Minsheng Bank, Industrial Securities and CITIC Securities predicted PPI to decline by 2.2%, 2.4%, 2.7%, 2.5%, and 2.8%, respectively, in October from a year earlier.
As the introduction of stimulus measures have boosted market expectations, the prices of commodities such as steel, cement, copper, and aluminum have risen since the end of September, and in addition, due to geopolitical tensions in the Middle East, international oil prices have slightly increased in October, said Golden Credit Rating.
The two price indices in the official manufacturing Purchasing Managers’ Index (PMI) rose significantly in October and PPI is expected to show a month-on-month growth in October, and the year-on-year decline will narrow given the stable price base in the same period last year, it said.
