The Economy: Still Solid

Now watch attitudes towards the state of the Chinese economy change after a sharp fall in monthly consumer and producer inflation in October.

The news will spark rumours of monetary policy easings, such as interest rate cuts, or reductions in asset reserve ratios at the country's banks.

It was the first bit of good news for the global economy for a couple of weeks as the relenting sense of crisis in Europe has overshadowed other data.

The data releases confirm the economy is continuing to cool, but so far there's no sign of a hard landing, despite worries about local government debt and the crunch impacting small business and the banks.

The consumer price index rose 5.5% from a year earlier, while the producer price inflation was up 5%.

The outcome was in line with forecasts published in some sections of the Chinese media at the start of the week. (Air reported those forecasts on Tuesday.)

The figures compared to September's data, which showed a year-on year rise of 6.1% in the CPI and a 6.5% gain in the PPI.

The increase in producer prices in October was the smallest rise for a year.

The news helped send Asian stockmarkets higher yesterday and added to the confidence generated by a looming change in the Italian leadership with Silvio Berlusconi tipped to soon resign.

The Australian market jumped 1.5%, the Hang Seng Index jumped 2.2% and China's Shanghai Composite added 0.5% in early moves

Japan's Nikkei Stock Average added 1% and South Korea's Kospi was up 0.4%.

Among details within the reports, food inflation moderated to an 11.6% year-on-year gain in October, cooling from a 13.4% rise in September.

Pork prices were up 38.9% from October of last year, but that was down from the 45.5% rise in September and more than 60% earlier in the year.

The report also showed non-food components of the CPI eased to a 2.7% year-on-year gain, down from a 2.9% rise in September.

The People's Bank of China raised interest rates five times from October 2010 to July and boosted banks' reserve requirements nine times to a record 21.5% for the biggest lenders to control over-lending, especially on property.

Falling costs for commodities such as oil and an improved supply of pork are helping to ease price pressures.

Petrol and diesel prices were cut by 3.5% and 3.9% respectively in early October after world prices eased. It was the first reduction this year.

And in Japan there was also good news, with the country's September current-account surplus jumping sharply, as the trade account swung to a surplus.

The Ministry of Finance reported that the current-account surplus widened to 1.585 trillion yen ($US20.4 billion), compared to ¥407.5 billion in August.

The trade surplus hit ¥373 billion from a ¥695 billion deficit in the previous month.

Despite the improvement, the current-account surplus was 21% below year-earlier levels, while the trade surplus was 59% less than it was in September 2010.

China's industrial value-added output grew at a 13.2% rate in the year to October, according to the National Bureau of Statistics said yesterday.

That was down from the stronger 13.8% annual rate in the year to September.

On a monthly basis, output increased by 0.9% from September.

In the first ten months, industrial value-added output increased 14.1% year-on-year, down 0.1 percentage points from the first nine months.

The national Bureau of Statistics said China's fixed-asset investment rose 24.9% in the year to October, unchanged from the rate in the year to September.

On a monthly basis, fixed-asset investments increased 1.34 percent in October, the statistics bureau reported.

Investment in the nation's property sector rose 31.1% from the same period last year.

And, China's retail sales grew 17.2% year-on-year to reach 1.65 trillion Yuan (about $US262.6 billion) in October.

That was up from the 17.2% annual rate in the year to September.

After deducting inflation, actual growth was 11.3%. On a monthly basis, retail sales increased 1.3%. During the first 10 months, the country's retail sales rose 17%.