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Chinese headline CPI inflation accelerates in September, inflation outlook stays supportive

Chinese consumer price index rose in the month of September, owing to the rise in food prices. The headline inflation accelerated to 2.5 percent year-on-year from August’s 2.3 percent. This is in line with market projections.

In September, food prices rose 3.6 percent year-on-year, marking their strongest rise since 2017. On a sequential basis, food prices were up 2.4 percent. The rate if rise was also significantly more rapid than the 1.7 percent seen in August. The price spike was mainly due to inclement weather conditions.

Some vegetable producing regions had encountered storms that disrupted supply conditions. Therefore, the prices of vegetables and fruits rose sharply by 9.8 percent and 6.4 percent, respectively, together adding 0.35 percentage points to the rise in the headline CPI on a year-on-year basis.

Local food prices are likely to hold up, especially as pork prices have been rebounding in spite of the swine fever outbreak since July, noted ANZ in a research report.

Meanwhile, the headline PPI decelerated in September, slowing down to 3.6 percent year-on-year. This was mainly because of high base effects because it had risen by 6.9 percent year-on-year in September 2017. On a sequential basis, the PPI accelerated to 0.6 percent from August’s 0.4 percent.

According to ANZ, this momentum is expected to continue, though the high base might suppress the annual rate. Global crude oil prices have become the major factor driving China’s PPI. The price index of oil and natural gas further rose to 41.2 percent from 39.6 percent in August.

“Overall, inflation is still within a supportive range and we think it is not yet a major factor for policy decisions”, stated ANZ.

At 12:00 GMT the FxWirePro's Hourly Strength Index of Chinese Yuan was highly bullish at 119.468, while the FxWirePro's Hourly Strength Index of US Dollar was highly bearish at -143.84. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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