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CPI Slows More Than Expected, PPI Back Into Deflationary Territory

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China headline CPI came in weaker than expected, rising 2.1% y/y, against a 2.4% y/y expectation. Last month was 2.8% y/y. PPI dipped back into deflationary territory, down -1.3% y/y from last month's +0.9% outcome, but this was slightly better than market estimates (-1.5%).

  • The headline miss for CPI was helped by food price pressures, where the y/y pace eased to 7.0%, from 8.8% last month. Non-food inflation moderated further though, back to 1.1% y/y, from 1.5% in September.
  • Only 1 sub category saw firmer y/y momentum in the month, while the housing sub component fell -0.2%. Core inflation was unchanged at 0.60% y/y.
  • The data is still arguing for easier financial conditions, although there is some stability in onshore yields, with the 2yr continuing to hold above 2%, see the first chart below.

Fig 1: China Core CPI Versus 2yr Government Bond Yield

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China headline CPI came in weaker than expected, rising 2.1% y/y, against a 2.4% y/y expectation. Last month was 2.8% y/y. PPI dipped back into deflationary territory, down -1.3% y/y from last month's +0.9% outcome, but this was slightly better than market estimates (-1.5%).

  • The headline miss for CPI was helped by food price pressures, where the y/y pace eased to 7.0%, from 8.8% last month. Non-food inflation moderated further though, back to 1.1% y/y, from 1.5% in September.
  • Only 1 sub category saw firmer y/y momentum in the month, while the housing sub component fell -0.2%. Core inflation was unchanged at 0.60% y/y.
  • The data is still arguing for easier financial conditions, although there is some stability in onshore yields, with the 2yr continuing to hold above 2%, see the first chart below.

Fig 1: China Core CPI Versus 2yr Government Bond Yield

Keep reading...Show less