China: PPI inflation reached a new high in September, driven mainly by higher energy prices; raising our PPI inflation forecasts while cutting our CPI inflation forecasts

China's headline CPI inflation edged up to +0.9% yoy in September from +0.8% yoy in August, mainly on higher energy and transportation services prices. Headline PPI inflation rose to +5.0% yoy in September from +3.8% yoy in August, mainly due to higher prices for energy goods and chemicals. Incorporating the September CPI/PPI print, as well as our commodity strategy team's latest oil price forecasts, we are revising up our 2026/27 full-year PPI inflation forecasts to 2.8%/0.3% (vs. 2.0%/0.0% previously). Under the revised path, year-over-year PPI inflation is likely to turn negative as early as Q2 next year, due to a high base this year. We also revise down our 2026/27 full-year CPI inflation forecasts to 0.8%/0.6% (vs. 1.0%/1.0% previously), driven by weak domestic demand and our expectations of fading boost from energy prices in 2027.