For y/y data:
CPI +0.3%
- Continuing to claw its way out of the downturn
- This is the third month in a row that the CPI has exceeded zero on an annual basis
- Expected +0.2%, Previous +0.1%
Producer Price Index -2.5%
- The economy remains in a deep contraction, as it has been since October 2022
- Expected -2.3%, Previous -2.8%
The uptick in CPI is good news in China and should be positive for Chinese markets, and for Chinese proxy trades, such as the Australian dollar, on the margin.
Stay tuned, it's an active week coming out of China, with the People's Bank of China set to issue a rate decision on its medium-term lending facility (MLF) on Wednesday. No change in price is expected. If we see cuts from the People's Bank of China, the first will likely be to the Reserve Requirement Ratio (RRR). Actual cuts in lending rates would widen the interest rate differential with the rest of the world (cough…USA) and would increase pressure on the yuan. In the coming months, the People's Bank of China may have no choice but to cut interest rates if the economy continues to falter. There are “green shoots” emerging (last week's trade data was a welcome improvement), but they are sporadic and the debt-laden real estate sector remains a major drag.
This screenshot, from our economic calendar, is of the Consumer Price Index (CPI) on an annual basis. The CPI scale is on the right side and is a bit confusing, but I put a box around the zero point to make it easier to see: