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J.P. Morgan On China Inflation Outlook

CHINA DATA

The US Bank provides an update on the China inflation outlook, post the weekend data. It expects a modest further recovery in China inflation pressures, as policy stimulus takes time to impact the economy.


"In all, we expect China’s general pricing environment will remain relatively soft for the rest of the year, as the imbalance between domestic supply and domestic demand conditions will take time to be resolved, and more meaningful policy response will be crucial to boost household income, reduce precautionary savings and provide funding support for pro-consumption measures. Regarding the inflation trajectory, base effect may help bring up headline CPI inflation print moderately towards 4Q, though still staying at rather low level (we expect CPI inflation to average at about 0.6%oya in 4Q, with full-year CPI inflation rate at 0.5%yoy). Meanwhile, on the PPI front, while the earlier drag from global energy price weakness seems to have faded and turned around somewhat, the impact of latest policy support measures on domestic industrial demand (and hence industrial pricing power) will likely be modest and will take time to feed through. As such, PPI deflation pressure will likely ease steadily going forward, though the PPI print will likely still stay in annual deflation zone through 1Q24."

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