China consumer price index (CPI) increased 1.6% year-on-year in September, the lowest level since January 2010, according to data released by China’s National Bureau of Statistics.
Producer price index (PPI) declined 1.8% year-on-year in September, compared with August’s 1.2% drop.
The PPI data reflect a de-stocking process amid sluggish domestic demand. In addition, it suggests that the profit margin of Chinese corporates will be further squeezed and their capital expenditure demand will remain weak in the next few quarters, according to a report by ANZ.
"We expect policy rates to stay low until the end of the year. The likelihood of other policy loosening such as interest rate and RRR cuts has risen as well, but if they do occur they are likely to come in targeted form as opposed to across-the-board cuts," says a research report by Goldman Sachs Gao Hua.
