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Dec Inflation Close To Expectations. Core Steady At 0.6% Y/Y


China Dec inflation outcomes were close to expected. The headline CPI fell -0.3% y/y (-0.4% forecast and -0.5% prior). In m/m terms we rose 0.1%, the first rise since September last year. Consumer goods were -1.1% y/y, services +1.0% y/y. Food prices were 0.5% y/y, non-food at -3.7% y/y, both slight improvement on Nov outcomes. Core (ex food & energy) was unchanged at 0.6% y/y.

  • By product for CPI, there weren't a great deal of shifts versus Nov outcomes. Food and transport & communication were the biggest drags both down around -2% y/y. Positives remained in terms of clothing, medical care and recreation.
  • On the PPI side, we were slightly weaker than expected at -2.7% y/y (-2.6% forecast, -3.0% prior). Again, there wasn't much shift from Nov trends in terms of the detail. Mining at -7.0% y/y remains the biggest drag, while manufacturing was -3.2% y/y. Consumer goods remained at -1.4%, weighed lower by food and durables.
  • The data shouldn't really shift the macro narrative, albeit that deflation pressures didn't get any worse through the tail end of 2023 for China.
  • As we noted earlier, market expectations are for a 10bps cut in the 1yr MLF on Monday.

Fig 1: China CPI & PPI Y/Y

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