China's consumer inflation came in weaker than expected in October, while prices at the factory gate fell for a 44th straight month, fueling calls for more monetary easing and fiscal stimulus to combat deflationary pressures.
The consumer price index, the main gauge of inflation, rose 1.3 percent year on year in the month, slowing from a 1.6 percent rise in September, the National Bureau of Statistics said on Tuesday.
The deceleration was largely due to the slower growth of food prices, which account for about a third of the CPI basket. Food costs grew 1.9 percent in October, slowing from 2.7 percent a month earlier.
Prices in the non-food sector, meanwhile, increased 0.9 percent in the month, down slightly from 1 percent in September.
Yu Qiumei, a researcher at the bureau, said an ample food supply during the past month helped moderate the increases.
Fresh fruit and egg prices fell 9.1 percent and 13.8 percent, respectively, in October, but pork jumped 15.8 percent, following a 17.4 percent gain in September.
Liu Ligang, chief China economist at Australia & New Zealand Banking Group, said the food price cycle appeared to have peaked and that inflation is unlikely to see a substantial pick-up in the near future.
"The data reinforced our view that China's deflationary pressure has intensified," Liu said.
That pressure comes mostly from the producer price index, the measure of inflation at the factory gate.
It fell 5.9 percent in October, the same as in September, and extended the negative trend to 44 straight months.
"The PPI has been low for such a long time, companies have very little room to increase their factory gate prices," Liu said.
"Meanwhile, given commercial banks' pro-cyclical nature, loan growth tends to slow during an economic slowdown," he said.
Zhu Haibin, chief economist for China at JP Morgan, said the PPI figures reflected overcapacity on the domestic front as well as the lower commodity prices on global market that created imported deflationary pressure.
"The PPI deflation will continue, although in year-on-year terms it might narrow modestly in the next few months due to a favorable base effect," he said.
In the first 10 months, China's CPI gained 1.4 percent, while the PPI decreased 5.1 percent.
Liu said the lower-than-expected inflation growth might result in further policy measures from the government.
"The data opened the door for more monetary easing from the central bank," he said.
Zhu said the chances of an interest rate cut are limited, but that there remains room for another reduction of the reserve requirement ratio.
China's economy rose 6.9 percent year on year in the third quarter, its slowest rate since 2009. Earlier data showed foreign trade also fared worse than expected in October, casting fresh shadows over an expected economic stabilization.
