Free Trial

Food Drags Headline CPI Lower, PPI Trend Improves Modestly

CHINA DATA

China September inflation prints were a touch weaker than expected. Headline CPI printed at flat in y/y terms, versus a 0.2% forecast and 0.1% prior. Core CPI was steady at 0.8% y/y. The PPI was -2.5% y/y, against a -2.4% forecast and -3.0% prior.

  • For CPI this was towards the bottom end of estimates, although the lowest forecast was -0.1% y/y. The m/m rise was 0.2%for headline, down slightly from the August pace of 0.3%, but still above the average pace seen in the first half of 2023.
  • Consumer goods inflation was -0.9% y/y, while services held steady at 1.3% y/y. Non-food inflation rose to 0.7% y/y, from 0.5% in August. The drag from food got larger, -3.2% y/y from -1.7%.
  • Outside of food, we saw either the same y/y print or slight improvement in terms of the sub-categories. Household items and transport saw reduced disinflation. Hence outside of the drag from food the result is not that weak, which is consistent with core inflation holding steady at 0.8% y/y.

Fig 1: China Core CPI Y/Y & 10yr CGB Yield

Source: MNI - Market News/Bloomberg

  • On the PPI saw we saw modest further improvement in the headline, led by less drags from the mining sector (-7.4% y/y, from -9.9%) and raw materials (-2.8% y/y from -4.0%). This is consistent with improved commodity prices, although that trend has stabilized somewhat in recent weeks.
  • Manufacturing was -2.8% y/y (from 3.1% y/y), but consumer goods dipped slightly further to -0.3%y/y (-0.2% prior), led by durables -1.2% y/y.
  • Still, less negative PPI momentum y/y is consistent with a modestly improving CNY NEER trend, see the second chart below.

Fig 2: China PPI Y/Y Versus J.P. Morgan CNY NEER (Y/Y)

Source: J.P. Morgan/MNI - Market News/Bloomberg

To read the full story

Close

Why MNI

MNI is the leading provider

of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.

Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.