China's August inflation trends hint at stabilizing economy

In August China's consumer price inflation dropped to its weakest pace in almost a year, pulled down by abating food costs, though an encouraging moderation in producer price deflation contributed to surging evidence of a steadying economy.

The broader inflation trends unveiled in Friday’s data confirmed recent signs of a more sure-footed revival in the world’s number two economy, thus allowing the government to resist any fresh monetary easing as they are trying to curb an unsustainable build-up of credit in the national financial system.

The picture appears to be one of soaring price pressures, and exactly for this reason we'd be skeptical of claims this latest drop in inflation might increase the probability of further monetary easing by the major bank.

A housing and construction rebound has spurred industries, such as steel and coal. While many sectors kept struggling with overproduction, domestic demand has held up well, including trade data on Thursday disclosing a surprising improvement in imports.