Analysts predict China's consumer price index (CPI) and the producer price index (PPI) to drop in September.

CPI is a key measure of inflation. PPI measures the average change in the selling prices received by producers for their output,

Taking in to account food prices and last September's 6.2 percent CPI increase, inflation in September 2008 is likely to drop for the fifth consecutive month, analysts said. Rising food costs are one of the primary factors leading to CPI inflation in China.

The PPI, which reflects manufacturing costs, was also expected to fall from a record high of 10.1 percent set in August, as a result of lower commodity prices on the international market.

Ha Jiming, chief economist of China International Capital Corporation Limited, forecast September's CPI would fall from 4.9 percent in August to around 4.5 to 4.8 percent.

The PPI reading in September was expected to drop to between 9.7 to 10 percent. The margin between CPI and PPI would continue to be maintained, he said.

Li Huiyong, chief analyst of Shenyin & Wanguo Securities, predicted the CPI for September would fall to less than 4.9 percent. He also forecast a two percentage point drop of the PPI, which would place it at 8.1 percent.

Industrial Bank Chief Economist, Lu Zhengwei, estimated the CPI reading for September would be somewhere between 4.6 and 4.9 percent and the CPI for the third quarter would be below six percent.

Lu said CPI inflation would continue to slowly drop in the coming months and the country's economy could possible encounter deflation in 2009.

As usual, the National Bureau of Statistics (NBS) was expected to release September's CPI and PPI readings later this month.

According to the NBS, China's CPI rose 4.9 percent in August from a year earlier. The figure, compared with 6.3 percent in July this year, 7.1 percent in June and 7.7 percent in May, was lower than most forecasts.

(Xinhua News Agency October 10, 2008)