CHINA’S prolonged industrial deflation finally came to an end last month, pointing to improved operating conditions for factory owners, official data showed Friday.

    China’s producer price index (PPI) edged up 0.1 percent in September from a year earlier, reversing a 0.8 percent year-on-year drop in August, the National Bureau of Statistics said. The index has lingered in deflationary territory for almost five years but the decline in prices started to narrow at the beginning of this year.

    The rise in the gauge of factory-gate prices came in better than a median forecast of a 0.2 percent decline by 16 economists surveyed by The Wall Street Journal.

    The PPI increased 0.5 percent in September from a month earlier. In August, it rose 0.2 percent from the preceding month.

    Official inflation data Friday also showed a pickup in consumer prices, helping to ease investors’ concerns about the health of the world’s second-largest economy after disappointing trade numbers Thursday rattled global markets.

    The consumer price index rose 1.9 percent in September from a year earlier, accelerating from a 1.3 percent year-on-year rise in August.

    The key inflation reading exceeded a median 1.7 percent gain forecast.

    The result was still below the government’s targeted maximum of 3 percent consumer inflation this year, giving room for policy makers to further ease monetary policy.

    On a month-on-month basis, the CPI rose 0.7 percent in September from a month earlier. In August, it climbed 0.1 percent from the previous month.

    “An uptick in inflation, if sustained, would be good news for China’s ability to service its overhang of corporate debt,” Bill Adams, senior international economist at PNC Financial Service Group, said in a note.

    “With low interest rates keeping debt service costs in check and producer prices rising, the outlook for Chinese industrial profits is improving.”

    China’s factory prices have been falling since March 2012, and more than four years of producer price deflation have squeezed industrial companies’ cash flow.

    Profits at roughly a quarter of Chinese companies were too low in the first half of this year to cover their debt servicing obligations, as earnings languish and loan burdens increase, according to a recent Reuters analysis.

    However, a construction boom, fueled by a government infrastructure spending spree and a housing rally, have helped boost prices for building materials from steel to copper in recent months, while coal prices have jumped as the government tries to shut excess mining capacity.

    Prices of ferrous metals, non-ferrous metals and coal mining together rose 4.1 percent year-on-year, a key factor in the PPI turning positive, the statistics bureau said.(SD-Agencies)