CPI rises 1.9 percent in October

China's consumer inflation rate rose by a higher-than-expected 1.9 percent in October from a year earlier, compared with 1.6 percent in September, the National Bureau of Statistics said on Thursday.

Analysts said that even if consumer inflation continues to strengthen in the coming months, it may only rise mildly and the country's monetary policy stance will remain largely neutral.

The October consumer price index reading is the highest in nine months, but it has been below 2 percent since February.

In the first 10 months, CPI growth stood at 1.5 percent compared with a year ago, well below the growth control target of 3 percent the authorities set early this year.

Non-food price growth is the main contributor to the CPI rise in October, said Sheng Guoqing, a senior statistician at the NBS.

Non-food prices, mainly health-related costs, rents, and education, culture and entertainment costs, rose by 3.2 percent year-on-year while food prices dropped slightly.

Analysts generally forecast that the CPI may continue to increase in the coming months due to non-food price rises, but it will remain largely stable.

"The domestic economy is improving, which will drive up non-food prices, and oil prices are expected to continue to rise, which will help push up China's CPI," said a research note from Lianxun Securities. "The low food price base of 2017 means food prices may increase more strongly next year, contributing to a CPI increase," it said.

But CPI growth is expected to be mild, because neither food prices nor prices of commodities, such as oil, will see very big spikes, said Deng Haiqing from JZ Securities.

Due to the expected mild growth of CPI, China's monetary policy stance may remain neutral, analysts said.

"Experience shows that so long as the CPI did not exceed 2.5 percent, the central bank would not tighten the monetary policy," said Deng.

However, China may continue to tighten financial regulation to ward off potential risks, said a research note by Switzerland-based financial group UBS. "We expect the ongoing regulatory tightening to continue and efforts to deleverage (especially for State-owned enterprises) to continue."

China's producer price index, which gauges factory-gate prices, rose by 6.9 percent year-on-year, unchanged from September.

Prices of paper, chemical raw materials and chemical goods and non-metallic minerals contributed the most to PPI growth in October, said Sheng from the NBS. Those of metals, coal mining and oil processing costs remained a major driving force for overall PPI growth, but their growth rates dropped in October compared with previous months.