MNI REALITY CHECK: Dip Below 2% Seen For China September CPI

China's consumer inflation may have slowed to below 2% y/y for the first time in eighteen months in September, helped by slower pork price gains, beneficial base effects on a year ago, along with increased supply levels as the economy reopens weigh on price pressure, industry leaders and analysts told MNI.

Food prices, a main driver pushing CPI higher in recent months, have stabilized somewhat, dampening upside pressure, according to Wang Jingwen, a senior researcher at the Pangoal Institution, with pork prices edged lower in the first half of September, having risen sharply in the same month a year ago, he said.

Average wholesale pork prices rose slightly to CNY34 per kilo through September, according to CNHNB.COM, the nationwide agricultural B2B website covering over 2,800 counties, 1% higher m/m, but slower than August's 4% rise. Despite the small gain, upward momentum had slowed dramatically, Li Binbin, an analyst at CNHNB.COM, told MNI.

Upside momentum for pork prices have slowed due to falling demand (as higher costs dampen demand), increased production and a release of stocks from government holding, said Li, noting that the government released a total 80,000 tons of pig meat in September to help ease the tight supply.

VEGETABLES

In terms of vegetables, as better weather arrived and the autumn vegetables came to market, the monthly average price of vegetables increased by just 3.4%, slowing from August's 8.4% gain, according to analysts at Huachuang Securities.

The price index of a basket of vegetables released by the Ministry of Agriculture and Rural Affair was CNY125.04 in September, up 2.94% from August, but slower than the 3.61% increase in the previous month.

Wang Jingwen also noted that more seasonal fruits arrived at market; seafood also arrived after the fishing moratorium ended; egg production increased as temperatures fell, all pushing food prices lower.

NON-FOOD PRICES

Prices of entertainment activities also steadied into the week-long early October holiday, while clothing prices stabilized, even edging higher as new season fashions arrived and general demand recovered, Wang added.

Fuel costs slipped on the government's move to lower the domestic gasoline and diesel prices in September, declining by CNY315 and CNY300 per ton, respectively. For car owners, it will cost CNY13 less to fill up with an average 50 litres of gasoline, a modest cost-saving, according to Wang Tao, an analyst at Zhongyu Information, a commodities advisory based in Shandong province.

Demand for fuel remained relatively weak, failing to recover to expected trading levels during the traditional driving season, pressurizing local refiners to clear inventory with promotions, said Wang Tao.

The average monthly wholesale price of gasoline for PetroChina and Sinopec in 30 major provinces declined by CNY66 to CNY5,891 per ton from August, while that of diesel also fell by CNY137 to CNY5,282, Wang Tao added.

Affected by the fall in energy prices, the prices of transportation and communications, as well as residential-related energy costs would be dragged down slightly on a monthly basis, Wang Jingwen said. He expects we may see September's inflation rate eased to 1.8% y/y from August's 2.4% when the data is released Thursday.