Free Trial

June Inflation Prints Below Expectations, With Soft Details

CHINA DATA

China June inflation data was weaker than expected. Headline CPI was flat y/y, versus +0.2% forecast. In the month, the CPI fell -0.2%, the same as May. M/M outcomes have been negative for the past 5 months. Non-food inflation fell -0.6% y/y, while food inflation rose 2.3% y/y. The core ex food and energy measure rose 0.4% y/y (May was 0.6%), a fresh low back to early 2021. The chart below overlays the core CPI print against the 10yr government bond yield.

  • Looking at the details of the CPI print, food and housing saw a pick up in y/y momentum, although housing is only back to flat after a long run of negative prints. The other 6 categories saw either the same y/y outcome or softer y/y momentum.

Fig 1: China Core CPI & 10yr Government Bond Yield

Source: MNI - Market News/Bloomberg

  • The PPI was also weaker than expected at -5.4% y/y, versus a -5.0% forecast. Weaker momentum was evident across all the sub components. Manufacturing eased to -4.7% y/y (from -4.6%), with consumer goods -0.5% y/y, with durables off by -1.5%.
  • Raw material prices fell -9.5% y/y, although we may see stability soon on this front given some basing in global commodity prices in recent months, see the second chart below.
  • All in all though, the data still point to a challenging macro backdrop for China. Calls for further policy stimulus are likely to persist post today's prints.
Fig 2: Global Commodity Prices & China's Raw Materials PPI

Source: 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.