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China’s Inflation Is Improving: Are Consumers More Selective?

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China’s inflation in September

According to a report provided by the National Bureau of Statistics of China, China’s inflation index improved 0.50% in September 2017 compared to a 0.40% rise in August 2017. It met the market expectation of a 0.50% rise. 

On a yearly basis, China’s inflation rose 1.6% in September compared to 1.8% in August 2017. It was in line with the market expectation of a 1.6% rise. The improvement in China’s (FXI) (YINN) inflation index is mainly due to the improvement in prices of non-food items. However, the costs of food items fell in September 2017.

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Impact on the economy and the market

The inflation index is an important indicator for the economy and for the market (ASHR) (MCHI). It’s also an important indicator in the central bank’s decision-making process. The gradual rise in the inflation index generally indicates that consumption and spending are improving.

We’ve already seen that China’s credit level touched a record high in the past year. To control the credit level, the central bank is focusing on tightening its key interest rate. The gradual rise in the inflation index will help the central bank with this process.

In the next part of this series, we’ll analyze China’s consumer confidence index in September 2017.

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