Consumer prices in China increased by just 0.4% in the year to September, the National Bureau of Statistics said on 13 October. The outturn was 0.2 percentage points below the expectations of the consensus of economists polled by Reuters. Chinese inflation outturns coming in below consensus should not be entirely unexpected — as the chart below shows, this has tended to be the case for several years. An additional worry for policymakers in the PRC is that core inflation dropped to just 0.1% in the year to September, reflecting continued weak demand in the Chinese economy. Moreover, we do not expect this picture to change materially in the near-term — the fiscal stimulus measures announced recently have disappointed investors. Our expectation is that China’s economy expanded by just 1.2% quarter-on-quarter in Q3, far below its typical rate of growth in recent years.
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