Instant View: China Sept inflation at 7-month high, factory prices fall anew

BEIJING (Reuters) - China's annual consumer inflation quickened to 3.1 percent in September, a seven-month high, up from the previous month's 2.6 percent and above market expectations, while producer prices fell for a 19th straight month, though the decline was less than forecast.

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KEY POINTS

Sept CPI +3.1 pct y/y (forecast +2.9 pct, prev month +2.6 pct)

Sept PPI -1.3 pct y/y (forecast -1.4 pct, prev month -1.6 pct)

COMMENTARY

ZHIWEI ZHANG, ECONOMIST, NOMURA, HONG KONG

"We expect CPI inflation to rise further in Q4 and see rising risks that it may rise above 3.5 percent for some months in 2014. The rise of CPI inflation leaves little room for policy easing as benchmark deposit rate is only 3 percent.

"Rising inflation is one of the seven reasons why we believe economic recovery is not sustainable. We maintain our view that growth has peaked in Q3 at 7.8 percent and will slow to 7.5 percent in Q4 and 6.9 percent in 2014. We continue to expect monetary policy to tighten after the November Communist Party meeting."

LI HUIYONG, ECONOMIST, SHENYIN & WANGUO SECURITIES, SHANGHAI

"September CPI inflation gained more momentum on seasonal factors and a low base effect from last year. But we think the inflation situation is still under well control and will not be a concern this year, especially when the economy is struggling with over-capacity problems."

"The figure will not affect the monetary policy stance. We think the central bank will keep its neutral monetary policy."

ZHOU HAO, ECONOMIST, ANZ, SHANGHAI

"The acceleration in September inflation was mainly driven by food prices. We expect inflation to stay over 3 percent in October. Full-year inflation could be 2.7 percent.

"Monetary policy will stay relatively tight in the coming months but any further tightening looks unlikely.

"The economy faces some downward pressures, especially by looking at the export data. Full-year GDP growth could be 7.6 percent."

LINKS

For details, see the website of the National Bureau of Statistics at http://www.stats.gov.cn

MARKET REACTION

The CSI300 Index of leading shares in Shanghai and Shenzhen was down 0.16 percent. The yuan was trading at 6.1166 per dollar.

BACKGROUND

-- Beijing has set a target to cap annual consumer inflation within 3.5 percent in 2013. Inflation in 2012 was 2.6 percent.

(China economics team)