China: Flat CPI inflation; PPI deflation eases in April – Nomura

By FXStreet Research Team at Nomura, notes that China’s April CPI inflation was unchanged at 2.3% y-o-y for a third consecutive month, in line with market expectation (Consensus: 2.3%; Nomura: 2.4%).

Key Quotes

“Food prices showed a seasonal decline, led by vegetable prices (-12.5% m-o-m), though pork prices continued to rise sequentially, pushing up its year-on-year inflation rate further to 33.5% y-o-y. Non-food price inflation rose to 0.1% m-o-m in April from -0.1%, with prices of all sub-categories rising during the month.

PPI deflation eased significantly, to -3.4% y-o-y in April from -4.3% in March, surprising expectations (Consensus: -3.7%; Nomura: -3.9%). On a month-on-month basis, PPI inflation rose to 0.7% in April from 0.5% in March, mainly led by prices of industrial products in the mining, raw material and processing sectors. The significant moderation of PPI deflation was largely due to the rise in commodity prices and capacity utilisation rate arising from stronger fixed asset investment growth.

Looking ahead, we expect CPI inflationary pressures to remain, largely driven by food prices (pork prices in particular) and rental inflation, while PPI deflation may continue to narrow. Combined with rising financial imbalances, we see future policy easing to be more cautious.

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Source:: FX Street