China’s consumer prices rose less than economists forecast last month and factory-gate deflation deepened for the first time in five months, reducing odds that officials will tighten monetary policy.
The consumer price index rose 3.2 percent last month from a year earlier, the National Bureau of Statistics said today in Beijing, compared with the 3.3 percent median estimate in a Bloomberg News survey and September’s 3.1 percent. Industrial-production growth unexpectedly accelerated to 10.3 percent, a separate report showed.
Inflation below the government’s 3.5 percent full-year target may allow Chinese Communist Party (CCP) leaders, gathering today in Beijing for an economic summit, to take a measured approach to reining in credit growth. State media have called the meeting a “watershed” for reform as China seeks to move to an economy focused on domestic demand.
“Both CPI inflation and economic growth still remain within Beijing policymakers’ comfort zone,” Hong Kong-based HSBC Holdings PLC chief China economist Qu Hongbin (屈宏斌) said.
While there is “no need for either easing or tightening in the coming months,” the central bank will have to use its tools to keep liquidity stable as money inflows keep rising, Qu said.
The gain in factory output compares with a median estimate of 10 percent in a Bloomberg News survey and September’s 10.2 percent pace. Retail sales rose 13.3 percent last month from a year earlier, the same pace as the previous month, while January-to-October fixed asset investment excluding rural areas expanded 20.1 percent, after a 20.2 percent rate in the first nine months, statistics bureau data showed.
The central bank is scheduled to release money supply and lending numbers by Friday.
Price gains have stayed within the government’s target of 3.5 percent every month this year. Estimates for last month’s consumer inflation from 44 analysts ranged from 2.8 percent to 3.5 percent, according to the Bloomberg survey. The median estimate of 40 economists was for a 1.4 percent drop in producer prices.
Producer prices fell a more-than-projected 1.5 percent, after a 1.3 percent decline the previous month. It was the 20th straight month of declining factory-gate prices, the longest stretch since 2002.
“As long as PPI inflation remains negative, there is little pass-through effect to CPI inflation,” Australia & New Zealand Banking Group Ltd economists Liu Li-gang (劉利剛) and Zhou Hao (周浩) said in a note.
Last month’s CPI gain was the highest since February when the index also rose 3.2 percent. Food prices rose 6.5 percent from a year earlier, the most since April last year, while non-food inflation was unchanged from September at 1.6 percent, according to yesterday’s data. Transportation and communications costs fell 0.6 percent, the most in four months.
Competition is helping keep consumer-price gains muted, as Chinese online shopping sites gear up for “Singles Day” sales tomorrow by slashing prices. 360buy Jingdong Inc (京東商城) began offering half-price Pampers diapers as of Nov. 1 and will slice as much as 70 percent off items including slimming belts and facial moisturizers, according to its Web site.
While inflation remains in a “comfortable zone,” it has begun to “flag an alarm for the monetary authority to keep a close watch on the trend,” Hong Kong-based Haitong International Securities Group chief economist Hu Yifan (胡一帆) said in a note.
Yuan positions at Chinese financial institutions accumulated from foreign-exchange purchases, a gauge of capital inflows, rose in September by the most in five months, data showed last month.
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