The BHP Group Ltd (ASX: BHP) share price is up 3.2% at the tail end of Monday's lunch hour.
BHP shares closed Friday trading for $38.09 and are currently trading for $39.31 apiece.
This comes amid a strong day for the markets more broadly, with the S&P/ASX 200 Index (ASX: XJO) up 1.1% at this same time.
And the materials sector is up twice that much, with the S&P/ASX 200 Materials Index (ASX: XMJ) having gained 2.2% today.
So, why is the BHP share price outperforming?
All eyes back on China
When the materials sector is widely outpacing the benchmark index, one of the first things to check is the iron ore price.
As expected, the industrial metal is up 3.9% today, trading for US$103.65 per tonne. That's a slightly higher boost in iron ore than we currently see in the BHP share price.
But there may be more tailwinds ahead.
That's because inflation in China, the world's number two economy and top importer of Aussie hard commodities, came in below consensus expectations.
The latest consumer price index (CPI) figures showed a 2.5% year-on-year increase in August. Inflation slowed from a 2.7% increase in July, as China's economy continues to struggle amid the nation's COVID-zero policy lockdowns.
In a classic case of bad news for a major economy being potentially good news for markets, the slowdown opens the door for the government and the People's Bank of China to provide more stimulus.
That, in turn, could send commodities like iron ore higher, helping support the BHP share price.
According to Eric Zhu, Bloomberg's China economist:
China's soft price data for August suggests inflation won't be a major constraint to monetary easing anytime soon. To the contrary, anaemic gains in core consumer prices and deep falls in metal costs are signs of weak demand and a recovery that's struggling on multiple fronts. This means more policy support is needed.
BHP share price snapshot
The BHP share price was just shy of record highs on 19 April this year, but has since retraced alongside the price of iron ore.
Year to date, BHP shares are down 7%, which compared to an 8% fall in the ASX 200 over that same period.
