China: PPI inflation hits fresh high on resurging energy prices

This Nomura Asia Insights report examines China's inflation outlook. CPI inflation edged up slightly in September, largely in line with market expectations, while PPI inflation rose to a fresh high for the year and came in well above consensus. The PPI pickup was driven mostly by global factors, including oil, coal, non-ferrous metals and chips, with oil contributing the most and more than offsetting gold's smaller contribution; the rise was highly concentrated in upstream sectors, while downstream consumer goods prices remained weak. Core CPI and services inflation stayed steady. The report argues that, given the PBoC's recent cut to the PSL rate and expansion of relending quotas, the case for broad monetary easing has weakened, and it expects no rate cut or RRR cut this year. For October, it forecasts broadly flat CPI and somewhat lower PPI on elevated oil prices and weaker food prices. Soaring oil prices also pushed coal prices higher, generating spillover effects, while pork deflat