China inflation: PPI surge "a notable increase in potential pipeline pressures"

Author: Eamonn Sheridan | Category: News

Yesterday we got Chinese inflation data for December, CPI and PPI


CPI 2.1% y/y
  • expected 2.2%
  • prior 2.3%
PPI 5.5% y/y
  • expected 4.7%
  • prior 3.3%
Yes, you read that right, a huge jump in PPI.

Says Daiwa in London on the data (in brief and bolding mine):
  • Having risen to a seven-month high in November, Chinese consumer price inflation in December came in a touch weaker than expected
  • The decline on the month was principally due to a drop in vegetable inflation
  • Non-food inflation rose 0.2ppt to 2.0%Y/Y
  • Core inflation excluding food and energy prices remained unchanged at 1.9%Y/Y
  • More striking, however, were the latest factory price data, which flagged a notable increase in potential pipeline pressures
  • Chinese PPI jumped the most in five years
  • Prices of raw materials up almost 10%Y/Y, producer prices of manufactured items up a little more than 5%Y/Y, but producer prices of consumer goods up a more modest 0.8%Y/Y

And, Macquarie highlight the new switch in focus for Chian data ...
  • In January 2016 the common fear was deflation and hard landing
  • Now the concerns are inflation and financial risks
As I said in the Asia wrap yesterday ... while the ongoing producer price increases have not trickled into consumer level prices the pressure is not quite on yet for the PBOC to tighten monetary policy, but a lean toward a move conservative policy may nevertheless come as debt build-up continues. AUD traders take note.