China's inflation rate drops again for September

10/14/2011 4:06 pm EST


Jim Jubak

Founder and Editor,

China’s inflation rate continued to drop in September, falling to an annual rate of 6.1%, according to government data released today. That’s down from 6.2% in August and from what now looks like the peak for this cycle of 6.5% in July.

Investors seem to be disappointed that inflation didn’t crack 6%. Hong Kong’s Hang Seng Index closed down 1.4% and the Shanghai Composite fell 0.3%.

I’d chalk that up to impatience. Traders and investors in China know that when the People’s Bank of China decides to reverse interest rate policy and starts cutting rates China’s stocks will soar. And they also know that the People’s Bank isn’t likely to start cutting until the central bank is certain that inflation is marching downward.

Hence the impatience to get the inflation rate below 6% as quickly as possible. (The official inflation target for 2011 is 4%.)

But I see plenty to like in today’s inflation numbers. Producer prices, an indicator of future inflation at the consumer level, were up 6.5% in September. That’s a solid decline from 7.3% in August and 7.5% in July.

Food prices were up at an annual rate of 13.4% in September but that’s the same annual rate as in August and a considerable improvement from the 14.8% peak in July.

And those of us looking for signs that China’s economy is slowing—which would bring down inflation as well as put more pressure on Beijing to order lower interest rates to make sure growth doesn’t fall too much—got more good news in today’s export data from China. The country’s exports grew at just a 17% annual rate in September. That was down from a 25% annual rate in August. Imports climbed at a 21% annual rate, down from a 30.2% rate in August.

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