China’s NBS released the CPI and PPI data for October this afternoon showing that inflation fell to 1.6% over the previous year to October.
For those who believe that inflation reflects underlying aggregate demand this paints a picture of an economy weakening. The data also suggests that the export data on the weekend and specifically the big uptick in exports to Hong Kong is likely to be an invoicing effect rather than ‘real’ trade.
Over the month the inflation result registered no change in prices against expectations of a rise of just 0.1%.
In terms of producer prices, the fall from -1.8 to -2.2% year on year is a dangerous acceleration in the rate of fall in PPI and worse than the -2.0% the market expected.
Deflation in PPI and continued disinflation in the CPI is just another indication that notwithstanding Xi Jinping speech to businessmen on the sidelines of APEC over the weekend that Chinese growth is and will remain strong, the opposite appears to eb the case.
Roll on further stimulus.