China’s PPI Declines Further, CPI Surprises in September
For the second consecutive day this week, economic data out of China disappoints markets on account of the prolonged trade war with the US. According to data released by the National Bureau of Statistics, China’s PPI declined 1.2% YoY in September, the sharpest fall in factory prices since July 2016.
Although the data matched economists’ expectations, it came in lower than August’s reading which revealed a decline of 0.8% YoY. Producer price index is a key indicator of corporate profitability, which has been under pressure in China on account of the escalating trade war and tariff hikes imposed by the US over the past year.
Meanwhile, on the positive side, CPI climbed to 3.0% YoY in September vs. 2.9% expected. This is the fastest rise in CPI seen since October 2013. Core CPI held steady, growing at 1.5% YoY during this period.
Despite the US and China announcing an interim trade deal at the conclusion of their high level discussions late last week, economic data from China is likely to remain weak in the near future as it could take some time for the trade deal to put on paper and signed, and its effects to be realized subsequently.
Following recent releases of weaker than expected economic data from China, analysts expect China’s GDP to possibly weaken below the government’s target of 6.0-6.5% in 2019. This data would reinforce expectations that the government would have to roll out additional stimulus measures to prevent the economy from weakening further.
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