China consumer price index (CPI) increased 2.0% year-on-year in August, compared with market consensus of 2.2% and July’s 2.3% hike, according to data released by China’s National Bureau of Statistics.
Producer price index (PPI) declined 1.2% year-on-year in August, slighter faster than market consensus of a 1.1% decrease and July’s 0.9% drop.
"We believe the fall in non-food CPI and PPI inflation is a reflection of weaker demand growth since July because of a less supportive policy stance," says a research report by Goldman Sachs Gao Hua.
"The fall leaves more room for policy makers to loosen policy if they want to," the report adds. "But inflation has not been the binding constraint on policy in recent months and so we believe its modest fall to around 2% will likely have limited policy implications."