China: Reflation continues, but the recovery needs to spread out – HSBC
Julia Wang, Research Analysts at HSBC, notes that China’s December PPI inflation came in higher-than-expected at 5.5% y-o-y and the upside surprise was largely due to the surge in oil prices towards year-end, which translated into significant price gains in oil and energy sectors.
Key Quotes
“Heavy industries also continue to post double-digit price increases. The industrial sector has been reflating over the past year, and the pace has accelerated towards year-end. But so far there is little sign of this spreading to the non-industrial part of the economy, which accounts for over two-thirds of GDP.”
“Headline CPI came in weaker due to easing food prices, while core CPI inflation was flat. A better policy mix, focusing on reviving private sector investment, as well as more market-based supply side adjustment will help to broaden the base of the recovery, and make it more sustainable in 2017. Until we see more signs of broad-based rise in inflation pressures, the PBoC should have good reasons to keep policy unchanged.”
Author
Sandeep Kanihama
FXStreet Contributor
Sandeep Kanihama is an FX Editor and Analyst with FXstreet having principally focus area on Asia and European markets with commodity, currency and equities coverage. He is stationed in the Indian capital city of Delhi.
