China’s PPI Falls For 43rd Month Running
China’s producer prices continue to fall in September, signalling prolonged weakness in aggregate demand, data from the National Bureau of Statistics showed on Wednesday.
The producer price index, a measure of costs for goods at the factory gate, fell 5.9% Y-Y, unchanged from the rate seen a month earlier.
The reading also marked the 43th straight month of decliners.
HeffX-LTN believes that the index will stay in negative in the foreseeable future as China still has a long way ahead to digest its over-capacity in upstream industries.
In addition, the country’s ongoing economic restructuring means a trending slowness in demand for traditional industrial goods, which will restrain prices.
Month on month, producer prices in September edged down 0.4%.
Output prices of production materials fell 7.7% in September, contributing 5.8 percentage points of the PPI drop during the month, while those of consumer goods edged down 0.3% during the period.
The data came along with the release of the consumer price inflation index, which edged up to 1.6% in September, slightly below the market forecast of 1.8% and 2% rise in August.
The downcast PPI and slowing CPI highlighted deflation pressure for China, projecting a high possibility of further cuts in interest rates and the bank RRR (reserve requirement ratio) in Q-4.
China is battling a property downturn, industrial overcapacity, sluggish demand and weak exports, which dragged growth down to 7% for 1-H of the year. Growth data for Q-3 is due next week.
Stay tuned…
HeffX-LTN
Paul Ebeling
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