China: Inflation figures surprised to the upside in August – UOB

Pablo Piovano FXStreet

Economist at UOB Group Ho Woei Chen, CFA, reviews the latest publication of inflation prints in China.

Key Takeaways

In line with expectation, China’s CPI recovered to rise 0.1% y/y in Aug from -0.3% y/y in Jul. CPI also rose on a sequential basis with the gain picking up to 0.3% m/m in Aug from 0.2% m/m in Jul. Risk of a sustained deflation in China remains low but we could still see some months of y/y contraction in headline CPI from now until 1Q24.

The pace of PPI contraction moderated to -3.0% y/y in Aug. More importantly, PPI rose sequentially for the first time in 9 months. The deflation trend is likely to persist into 1H24 though the pace will narrow due to base effect.

We maintain our forecast for the headline inflation at 0.4% in 2023 before strengthening to 1.7% in 2024. We expect the PPI to average -3.1% in 2023 before recovering slightly to 0.4% in 2024.

Author

Pablo Piovano

FXStreet

Born and bred in Argentina, Pablo has been carrying on with his passion for FX markets and trading since his first college years.

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