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World Economy

24

OPEC Monthly Oil Market Report – November 2017

China's

CPI inflation

rose 1.5% y-o-y in September, down from 1.7% in the previous month, according to

the

National Bureau of Statistics

(NBS). The headline decline was largely due to faster deflation in food

prices, which contracted 1.4% y-o-y in September, compared with the 0.2% contraction a month earlier.

Services prices increased 3.3% y-o-y, up 0.2 pp from the previous month, as a result of rising inflation in

healthcare and residence. The rising base effect was the main driver of the y-o-y decline, as the m-o-m CPI,

at 0.5%, was the highest since October 2016, driven by rising oil prices.

China's

producer price index

(PPI) improved to 6.9% y-o-y in September, compared with 6.4% a month

earlier. Rising inflation in raw materials and the heavy manufacturing sector was the main contributor to the

headline improvement, with faster growth reported in the ferrous-metals smelting, non-ferrous metals

smelting, and chemical materials and products sectors. Meanwhile, m-o-m inflation in several sectors – such

as coal, ferrous metals and non-ferrous metals, petroleum, paper, and chemical sectors – suffered as the

environmental production policy continued to expand. Inflation in consumer goods manufacturing remained

stable, reflecting relatively weak domestic demand.

Graph 3 - 27: China’s CPI and PPI

Graph 3 - 28: China’s trade balance

China's

merchandise exports

expanded 8.1% in September in US dollar terms, up 3 pp from the previous

month, according to the General Administration of Customs. The improvement was driven by a faster

expansion of exports to the US, the European Union, and ASEAN, while exports to Hong Kong contracted at

a faster rate. Exports of mechanical and electrical products and hi-tech products continued to lead the

headline recovery, reflecting the boost from the surge in demand for global electronics and robust economic

growth in advanced economies.

Merchandise imports

, measured in US dollars, expanded by 18.7% in September, accelerating from 13.5%

in the previous month. This is the fastest monthly expansion since March, and is the result of improving

domestic demand and rising commodity prices. In September, the volume of crude oil and iron ore imports

expanded by 10.6% and 11.9%, respectively, compared with an increase of 30.2% and 29.4% in import

value.

China’s

trade surplus

declined to a six-month low. As imports grew at a much stronger pace than exports,

China’s trade surplus in September dropped to $28.6 billion, the lowest level since March, and marking the

second consecutive month of decline. The moderation in export growth may be slower than the moderation

in import growth, as a result of relatively stable global economic growth; this will support the recovery in the

trade surplus and the foreign exchange reserve in 4Q17.

China's

industrial production

rose 6.6% y-o-y in September, following a 6.0% gain in the previous month

and beating market expectations of 6.2%. It was the steepest increase in industrial production since June, as

output grew further for both manufacturing – by 8.1% from 6.9% in August – and for electricity, gas and water

production – by 7.8 % from 8.7 %. On the other hand, mining production continued to decline by -3.8 % from

-3.4 % a month earlier.

1.5

6.9

4.4

-10

-5

0

5

10

Sep 15

Nov 15

Jan 16

Mar 16

May 16

Jul 16

Sep 16

Nov 16

Jan 17

Mar 17

May 17

Jul 17

Sep 17

CPI

PPI

Official interest rate

Sources: China Index Academy, China National Bureau of

Statistics, Soufan and Haver Analytics.

% change y-o-y

198.2

-169.6

28.6

-200

-150

-100

-50

0

50

100

150

200

250

Sep 16

Oct 16

Nov 16

Dec 16

Jan 17

Feb 17

Mar 17

Apr 17

May 17

Jun 17

Jul 17

Aug 17

Sep 17

US$ bn

Exports

Imports

Trade balance

Sources: China Customs and Haver Analytics.