China's headline consumer price index fell 0.2 percent on the year in October after no change in September. Headline inflation has now been close to zero or in negative territory for seven consecutive months. The index fell 0.1 percent on the month after an increase of 0.2 percent previously. The fall in headline inflation was driven by food prices, down 4.0 percent on the year after declining 3.2 percent previously, while the year-over-year increase in non-food items was unchanged at 0.7 percent.

Today's inflation data provide further evidence, after last week's PMI survey data, that momentum in the Chinese economy's recovery has stalled again despite recent steps to loosen policy and improve liquidity conditions. This may strengthen the case for further policy adjustments in coming weeks.

The fall in headline CPI matched the consensus forecast for a decline of 0.2 percent. The China RPI and RPI-P fell from minus 43 to minus 64 and minus 100 respectively, indicating that recent Chinese data in sum are now coming in well below consensus forecasts.

After September's lower-than-expected zero percent year-over-year rate, October is expected to see a decrease to 0.2 percent contraction. China's CPI last peaked in January at 2.1 percent.

Consumer Price Index (CPI) is an index that measures changes over time in the price level of consumer goods and services purchased by residents, which reflects the overall changes in price level.

Consumer prices account for a majority of overall inflation, which is carefully monitored by investors worldwide. Investors worldwide monitor Chinese price changes closely. A pickup in inflation could mean an increase in interest rates is in the offing from the People's Bank of China while an easing could mean looser monetary policy. The monthly CPI is broken down by 8 categories with more detail available on the following day including aggregate information by urban and rural areas and provinces.

The CPI measures the change in the level of prices for a specified basket of goods and services normally purchased by urban and rural residents. Approximately 226 areas throughout the country are covered, including 80 counties and 146 cities. The current CPI is an annually chained Laspeyres price index and has been available since 2001. From 1978 to 2000, the index was compiled using current year weights for most items.