Further Moderation In Inflation Likely Across Asia

Today China’s January CPI printed below expectations falling to -0.8% y/y from -0.3%, the worst since 2009, but there were negative base effects. But core moderated to 0.4% y/y from 0.6% with lower consumer goods prices and services inflation. Food prices were down 3.6% y/y. Global food prices fell for the sixth consecutive month in January and are now down 10.4% y/y with weakness across categories except sugar.

• Even without China’s deflationary influence, headline and core inflation across Asia have eased. Our non-Japan Asian ex China aggregate eased to 3.9% from 4% in January assuming unchanged rates for those countries who haven’t released the data yet, but given regional trends, the aggregate could be lower when they do. Core moderated by more falling to 2.1% from 2.4%, the lowest since December 2021.
• Lower food and fuel prices helped to bring inflation down across the region and look likely to continue to do so. Global oil prices jumped 2% in January due to geopolitical tensions in the Middle East but have stabilised since then. It is also worth noting that Brent is down almost 15% since September. Rice prices rose sharply in H2 2023 but have started this year on a softer note with the February average of processed rice prices down 7.5% from December. Global cereal prices fell 2.2% m/m in January.