China's annual consumer inflation rate rose to a seven-month high of 3.1 percent in September as poor weather drove up food prices, limiting the scope for the central bank to manoeuvre to support the economy even as exports showed a surprise decline. But few analysts expect a further sharp rise in inflation or policy tightening in coming months as the world's second-largest economy still faces a weak global environment and Beijing tries to tap the brake on credit-fuelled investment.
The inflation rate was higher than a median forecast of 2.9 percent in a Reuters poll and August's 2.6 percent, but was still below the official target of 3.5 percent for 2013. "We expect CPI inflation to rise further in Q4 and see rising risks that it may rise above 3.5 percent for some months in 2014," said Zhiwei Zhang, China economist at Nomura in Hong Kong. Upbeat September credit data released later on Monday signalled that the central bank may have already eased up its control on bank lending following a liquidity crunch in June, which analysts warn could fan property bubbles and long-term inflation risks.
Month-on-month, consumer prices rose 0.8 percent, the National Bureau of Statistics said, bigger than a rise of 0.5 percent expected by economists. Food prices gained 1.5 percent in September from August due to droughts and floods in some areas, pushing up the CPI by 0.51 percentage points, Yu Qiumei, a senior statistician at the bureau, said in a statement. In annual terms, food prices jumped 6.1 percent. China's exports dropped 0.3 percent in September from a year earlier, against expectations of a 6 percent rise, data showed on Saturday, a disappointing break to a recent run of indicators that had signalled the economy may be regaining momentum.
Producer prices fell 1.3 percent from a year earlier, a smaller fall than the 1.4 percent expected by the market and the 1.6 percent drop in August. However, there was some relief to manufacturers struggling to cope with profit-eating price declines, as producer prices rose 0.2 percent from August. After slowing in nine of the past 10 quarters, the economy looks to have stabilised since mid-year after Beijing acted to head off a sharper downturn with increased spending on public housing construction, railways and tax cuts for smaller firms.
Chinese banks made 787 billion yuan ($128.6 billion) worth of new yuan loans in September, higher than a forecast of 650 billion yuan and more than the previous month's 711.3 billion yuan. Total social financing (TSF), a broad measure of liquidity in the economy, was at 1.4 trillion yuan in September versus August's 1.57 trillion yuan - which nearly doubled from July's level.