China’s headline Consumer Price Index (CPI) rebounded to 0.2% y/y in October (Bloomberg est: -0.1%, September: -0.3%) after two consecutive months of negative prints. Core CPI (excluding food & energy) continued to rise to a 20-month high of 1.2% y/y from 1.0% y/y in September. Services inflation strengthened to 0.8% y/y (September: 0.6%) while consumer goods price deflation eased to -0.2% y/y (September: - 0.8%), UOB Group's Economist Ho Woei Chen notes.

China’s CPI returns to positive territory in October

"The improvement in October was due to stronger holiday demand for hotel accommodations, airfares and tourism as well as a low base effect. The sequential gains picked up to 0.2% m/m from 0.1% m/m in September with services rebounding 0.2% m/m (September: -0.3%) and food prices continuing to rise 0.3% m/m (September: 0.7%)."

"The food price deflation eased to -2.9% y/y from -4.4% y/y in September. While most of the key food products in the basket continued to fall, the pace has narrowed, including pork (-16.0% y/y, -0.23 ppt), eggs (-11.6% y/y, -0.08 ppt), fresh vegetables (-7.3% y/y, -0.18 ppt), fresh fruits (-2.0% y/y, -0.04 ppt) while prices for aquatic products rose (+2.0% y/y, +0.04 ppt)."

"China’s Producer Price Index (PPI) deflation narrowed for the third consecutive month to -2.1% y/y in October (Bloomberg est: -2.2%; September: -2.3%), marking the 37th consecutive month of y/y contraction."