Chinese Consumer Inflation Eases in September

Chinese consumer inflation unexpectedly eased in September, as private spending remained weak and a decline in producer inflation worsened, underscoring the need for additional stimulus measures in the country.

Key Highlights

• Consumer Price Index (CPI): Inflation grew 0.4% year-on-year in September, down from 0.6% in the prior month and below expectations for stability.
• Month-on-Month CPI: Inflation was flat, missing expectations for a 0.4% increase.
• Personal Consumption: Continued weakness, with economic conditions pressuring domestic demand.
• Producer Price Index (PPI): Shrank 2.8% year-on-year, worse than the expected 2.5% drop and up from 1.8% decline last month.

Economic Implications

These inflation readings indicate sustained weakness in China's economy, following a recent disappointment from the finance ministry regarding fiscal stimulus plans.

Finance Minister Lan Foan mentioned plans for more "counter-cyclical" measures this year, without offering specifics on timing or magnitude. Despite aggressive monetary stimulus announced in late September, including interest rate cuts, investors are urging for more targeted fiscal measures to counteract persistent deflationary trends.