Cooling PPI signals waning demand THE country’s factory-gate inflation cooled for a third straight month in September amid ebbing domestic demand, pointing to more pressure on the world’s second-biggest economy as it remains locked in a trade war with the United States.

Consumer inflation, on the other hand, picked up slightly in September from the previous month, led mainly by higher food prices, official data showed yesterday.

Overall, pricing pressures were contained, giving authorities the flexibility to ease monetary policy to shore up slowing growth. Over the weekend, central bank Governor Yi Gang said he sees plenty of room for adjustment in interest rates and banks’ reserve requirement ratio due to significant downside risks from the Sino-U.S. trade row.

Economic activity has been slackening in the past few months, prompting the People’s Bank of China to announce another cut to banks’ reserve requirement ratio (RRR) just over a week ago — the fourth reduction this year.

For this year, Yi said that CPI will likely come in about 2 percent and expects PPI between 3-4 percent.

The producer price index (PPI), a gauge of industrial profitability, rose 3.6 percent in September from a year earlier, compared with a 4.1-percent increase in August, according to data released by the National Statistics Bureau (NBS) yesterday.

On a monthly basis, the PPI picked up to 0.6 percent from 0.4 percent in August.

Julian Evans-Pritchard, senior China economist at Capital Economics, noted that the small monthly rise in producer inflation mainly reflected an “unsustainable” increase in global oil price.

“The bigger picture is that broader factory gate price pressures still appear to be cooling alongside weaker economic activity,” he said in a client note following the data release.

The consumer price index (CPI) rose 2.5 percent from a year earlier, in line with expectations of 2.5 percent and accelerating from August’ s 2.3-percent gain. It still remained comfortably below China’s inflation goal of 3 percent for 2018, same as last year.

The food price index increased 3.6 percent in September, up sharply from the 1.7 percent annual gain in September, due to extreme weather conditions such as seasonal typhoons, heavy rains and hailstorms, according to the NBS.(SD-Agencies)