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Inflation likely to jump in Oct as food prices rise
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CHINA’S inflation growth may continue to pick up in October, while other key economic data will likely point to stable growth, analysts said before the figures are due on Saturday.
People seemed optimistic ahead of a key meeting of the Chinese Communist Party, which will also start on Saturday and may shed new light on the pace and direction of reforms, analysts said.
The Consumer Price Index, the main gauge of inflation, may jump at a rate of between 3.2 percent and 3.4 percent in October, up from September’s increase of 3.1 percent, which was a seven-month high.
“The inflationary pressure will likely augment because of higher food prices and a low comparative base,” said Lu Zhengwei, chief economist at Industrial Bank. “The trend of faster inflation growth may continue into the second quarter of next year, and force policies to stay neutral.”
Chang Jian, an economist at Barclays, also said higher inflation could be led by increased vegetable prices, which were in turn boosted by a low base from last year. But the Producer Price Index, the factory-gate measurement of inflation, was expected to dip as global commodity prices softened last month.
“October data may show moderation in industrial production,” Chang said. “But retail sales growth will likely remain supported, benefiting from strong spending during the National Day holiday.
Both Lu and Chang projected a rebound in export growth in October, in part driven by one more working day this October compared with last year.
However, still weak external demand suggested limited upside potential for export growth in the coming months, Chang said.
Zhu Haibin, chief economist for China at JPMorgan, said the recent economic data provides a favorable backdrop for China’s leadership to shift focus back to structural reforms at the third plenary session of the 18th Party’s Central Committee, which will be held in Bejjing from Saturday to Tuesday.
“New leaders want to push economic reform to achieve balanced, inclusive and sustainable growth in the long term,” Zhu said.
In the third quarter, China’s economy grew 7.8 percent from a year earlier, the fastest pace this year in a rebound fueled largely by investment.
It was a mixed blessing because investment’s contribution to the economic growth rose further to 56 percent in the first nine months while consumption growth softened — a betrayal of the government’s call for faster restructuring efforts.
In October, China’s manufacturing activity strengthened to an 18-month high, better than expected and indicating sustained growth momentum in the world’s second-largest economy.
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