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China's inflation growth up more than expected in September

CHINA'S inflation stepped up stronger than expected in September for both consumers and producers in a signal of economic stabilization and the pick-up of demand.

Consumer prices rose 1.9 percent year on year in September, while producer price added 0.1 percent, the first increase in since March 2012, the National Bureau of Statistics said.

The consumer price index was mainly driven up by the food price inflation that increased 3.2 percent, and the producer price index was improved on the back of recovering commodity prices and a low base, analysts said.

"Coal, ferrous and nonferrous metal prices should be the main driver of the recovery in the near term," wrote David Qu and Raymond Yeung from Australia and New Zealand Banking Group. "Industrial profitability should continue to improve with the recovery of producer’s prices in the near term. We expect the overall inflation to remain stable by the year end."

China had an official target of CPI at around 3 percent in 2016, as the average market consensus for now by December is at 2 percent.

The figure climbed an annual 1.3 percent in August, marking a near one-year low and significantly slower than July's 1.8 percent spike.

"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 Services, said in a note on Friday.

"Higher prices for heavy industrial products will provide China's heavily indebted corporations with more top line revenue. With low interest rates keeping debt service costs in check and producer prices rising, the outlook for Chinese industrial profits is improving," Adams said.

The price data followed country's exports and imports data in previous days, as exports tumbled 10 percent in dollar terms in September and imports fell 1.9 percent.

A separate report on Thursday showed foreign direct investment (FDI) rose at an annualized 4.2 percent in the year to September, down from 4.5 percent the previous month.


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