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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.
CHINA DATA
China July inflation outcomes were close to expectations. The headline y/y CPI printed at -0.3%, versus -0.4% consensus forecast and flat prior. The m/m was +0.2%, versus -0.2% in June. This is actually the first m/m rise in the headline since January of this year. Services inflation rose 1.2% y/y, while for consumer goods, we slipped further into deflation at -1.3%, the fourth straight month of negative y/y outcomes.
- The core CPI measure rose to 0.8% y/y, versus 0.4% in June. This puts us back into the range that has prevailed for this metric since late last year. The chart below overlays this against the 2yr government bond yield.
- In terms of the detail, 7 out of 8 sub categories saw a firmer y/y readings compared to June. Recreation and education were a noticeable increase (up to 2.4% y/y from 1.5%). Only food fell, down to -0.5% from 2.0% in June.
- So, some signs of less deflation, coupled with more favorable base effects, suggests headline inflation in y/y terms can track higher in H2. The NBS stated as much post this data indicating the y/y drop is temporary.
- Still, market confidence around the growth backdrop is likely to far from assured.
Fig 1: China Core CPI Y/Y & 2yr Government Bond Yield
Source: MNI - Market News/Bloomberg
- On the PPI side, we were slightly below consensus at -4.4% y/y (versus -4.0% forecast) but improved on the June outcome of -5.4%. The detail showed less deflation in mining -14.7% y/y (prior -16.2%) and raw materials -7.6%y/y (-9.5% prior), which is line with higher spot commodity prices.
- Manufacturing price falls eased to -3.8% (prior -4.7%), while consumer goods remain in deflation at -0.4%, weighed by durables at -1.5%.
- Reduced PPI deflation argues for less CNY NEER weakness, albeit at the margins, see the second chart below. The CNY NEER has stabilized in recent weeks, but remains comfortably in negative y/y territory.
Fig 2: China PPI Y/Y & CNY NEER Y/Y
Source: MNI - Market News/Bloomberg
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.
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