Sell-side Views Post China Inflation Data

See below for sell-side updates post yesterday's inflation data. Goldman's sees a 'U' shaped recovery in CPI. TD sees divergent China versus US data surprises driving USD/CNY to Fresh YTD highs, although the risk of a China deflationary spiral isn't imminent.

• Goldman Sachs: "China's headline CPI inflation turned negative in July for the first time since early 2021, though slightly above consensus expectations. The moderation was primarily driven by a high base of food prices last July. PPI inflation rose in July in year-over-year terms, but below consensus expectations. Looking ahead, in year-over-year terms, we expect PPI inflation to bottom out this quarter, and CPI inflation to experience a "U-shaped" recovery in the coming months."
• TD: "The negative y/y print was in part due to a high base last year and is likely to be temporary, with the Aug CPI likely to show prices recovering on an annual basis. Food prices, which constitute a significant % of the CPI basket, declined over the month and exert a heavy drag on the headline CPI though other components suggest that prices pressures are picking up on the services side. Tourism prices accelerated in July, up 10.1%m/m, 13.1% y/y likely on the back of jump in summer travel. Recreational and travel prices may continue to extend its rise as authorities have signaled greater support to boost domestic travel. Meanwhile, PPI printed at -4.4% (cons: -4.0%, TD:-3.9%, June: -5.4%), a slight improvement from last month which wasn't surprising given the rebound in oil prices. Today's report highlights the economy faces subdued price pressures from weak economic demand, but the details don't point to an imminent risk of a deflationary spiral. Nevertheless, the divergence in data surprises between US and China is likely to act as a headwind for the CNY and an anchor for the USD, with the path of least resistance for USDCNY likely a break above the YTD highs."