Food Prices & Fuel Catalysts For Inflation Pickup Says CBA

CBA on Chinese inflation data: Headline consumer inflation rebounded to 0.2%/yr in December. Inflation recovered from November's first negative reading in 11 years. The catalysts behind the rebound are recovering food prices and rising fuel prices. However, core inflation, excluding food and energy, ticked down from 0.5%/yr in November to 0.4%/yr in December.

• Food prices rebounded notably on a month‑on‑month basis over December. The unusually cold winter disrupted the supply of fresh food. Furthermore, rising seasonal demand started to pick up ahead of the Lunar New Year (LNY) holiday between 11 and 17 February. As a result, fresh vegetable prices and pork prices increased notably by 8.5%/mth and 6.5%/mth over December, respectively.
• A 5.1%/mth rise in fuel prices in December contributed to the pick‑up in inflation. The National Development Reform Commission, China's national planning body, increased regulated fuel prices three times in December amid rising global oil prices. However, inflation pressure remains muted in services categori
• PPI deflation eased from 1.5/yr to 0.4%/yr in December, the weakest reading since February 2020. The rise in global commodity prices accelerated in December, led by petrochemical, coal and steel prices. As a result, the month‑on‑month growth rate lifted strongly to 1.1%/mth.