China's January inflation comes in slower than expected

The producer price index (PPI) -- an important barometer of the industrial sector that measures the cost of goods at the factory gate -- rose 0.1 percent on-year in January, compared with a 0.9 percent rise the previous month.

The reading extends a six-month slowdown in which price growth has eased each month since a high of 4.7 percent last June.

Slower factory-gate inflation reflects sluggish demand, while a turn to deflation could dent corporate profits.

The consumer price index (CPI) -- a key measure of retail inflation -- rose 1.7 percent, compared with 1.9 percent in December.

Both readings fell short of the expectations of economists polled by Bloomberg News.

PPI hit a two-year low and CPI a 12-month low, Julian Evans-Pritchard of Capital Economics said in a research note.

"Although CPI remains at a comfortable level, falling producer prices are a concern since these are highly correlated with profit growth in industry," said Evans-Pritchard.

"With factory-gate deflation likely to deepen in the coming months, we expect policymakers to roll out further measures to ease financial pressure on industrial firms."

American and Chinese trade negotiators are holding their latest round of trade talks in Beijing, trying to work out a dispute that he seen them impose tit-for-tat tariffs on billions of dollars in trade goods.

The trade war and slowing global growth has started to bite in China, which has posted a string of poor economic data in recent months.

GDP growth fell in 2018 to a nearly 30-year low of 6.6 percent.