China’s PPI is running red hot:
The producer price index (PPI), a major measure of inflation at the wholesale level, rose 5.4 per cent in February from a year earlier, the National Bureau of Statistics (NBS) announced today.
It quickened from 4.3 per cent in January this year, and 1.7 per cent in December 2009, when the figure posted the first monthly rise since December 2008.
Has the PBOC already blown it?
A report put out earlier, before this data was released, by our friends at Waverly Advisors says yes:
China’s trade data for February provided compelling evidence that policy makers waited
too long to begin tightening credit. Despite the successive PBOC reserve increases in
January and February and the impact of the long Lunar New Year holiday –which draws
millions of migrant workers away from their jobs for weeks to return home, the figures
showed dramatic gains. Total exports increased by 46% year-over-year while imports
increased by 45% over February 2009. Urban residential property prices meanwhile
increased by nearly 11% for the month while automotive sales posted a 46% Y/Y
Simply put, the PBOC ‘s tightening moves were too little, too late with total new loans in
February potentially exceeding 700 billion Yuan according to China Securities Journal.
This evening’s CPI and PPI releases will provide more data and, with consensus estimates
hovering between 2.5 and 3% Y/Y for consumer prices, any surprise may well spur more
dramatic action than we have seen to date. Even if inflation numbers do register inside
consensus however, it still seems likely that another reserve level increase will be put into
effect this month.
The Shanghai Composite is up modestly — not reflecting any worries that central bankers may seek to tighten further on the news.
Update: ForexLive has a nice rundown of the full data set here that’s been released. A big standout: food inflation at 6.2% vs. 3.7% in January!