Chinese Inflation Beats Forecasts

china potatoes

Chinese consumer prices climbed 2.7% year-over-year (YoY) in June, beating expectations for a 2.5% rise.

Meanwhile, producer prices fell 2.7%, more than expectations for a  2.6% fall.

This compares with a 2.1% rise in consumer prices and a 2.9% fall in producer prices in May.

Producer prices have been negative for 16 months and Bloomberg BRIEF economist Michael McDonough tweeted that this showed tremendous slack in the manufacturing sector.

We have previously reported on the excess capacity in Chinese industries has weighed on producer prices.

CLSA’s Christopher Wood previously wrote that PPI “is as good an indicator as any of the deflationary excess capacity in the system, which is why local fund managers are fond of tracking the correlation between PPI and nominal GDP growth, and also more recently with the A share market.”

Meanwhile, the Ministry of Commerce reported that food prices jumped in June, driven by rising seafood and meat prices.

The Australian dollar dipped below US91c on the news, while the ASX ticked up and was 1.25% up for the session a short time ago.

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