November 7, China’s consumer prices may have risen 5.5% in October, continuing a downward trend since inflation reached a 3-year high in July, the Oriental Post reported on Monday, citing research reports and economists.
The National Bureau of Statistics will release the macro economic data for October on Nov. 9. An institutional survey shows the country’s consumer price index (CPI) may gain 5.5% in October, the paper said.
China’s CPI added 6.5% on a yearly basis in July, the highest level this year, but the index gradually fell to 6.2% in August and 6.1% in September as the central government implemented an array of measures to tame inflation.
Food Prices
After entering the fourth quarter, prices of pork and other edible agricultural produce declined. Market watchers estimated the CPI would continue to fall in October.
Food prices gained 12% in October year-on-year, 1.4 percentage points (pps) lower than in September, driven by falls in prices of vegetables, edible oil, aquatic products and eggs, China Securities said in a report released on Nov. 2, citing the Ministry of Commerce.
The carryover effect is expected to weaken dramatically in Q4, extending October CPI to around 4.9%, according to the report.
In its latest research note, Bank of Communications said food prices in October may fall by 0.3-0.7 pps compared with a month earlier and the carryover effect may retreat 0.7 pps month-on-month.
Lian Ping, chief economist at Bank of Communications, was cited as saying the successive declines in CPI growth showed previous macro controlling policies have taken effect.
China ‘s CPI may have fallen to 5.5% in October and the producer price index (PPI) may have risen 5.7% from a year earlier, down from 6.5% in September, according to a Reuters survey of 21 institutions.
Monetary Policy
With the gradual decline of the CPI, a major gauge of inflation, the nation’s monetary policy seems to be showing a loosening tendency, the paper said.
Scholars estimated newly added loans in October may be slightly higher that the RMB 470 billion in September, while the broad money supply may have risen 12.9% in October, unchanged from that in September, the paper said.
UBS Securities economist Wang Tao said China’s purchasing managers’ index fell to 50.4 in October, indicating real economy activities are slowing down.
The central government has signaled it will not tighten liquidity further in the face of slowing economic growth and troubles at small and medium-sized enterprises, and Chinese banks are expected to extend over RMB 500 billion of loans in each month in the last quarter this year, Wang said.