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Saturday, August 13, 2022

China CPI Turns Negative For First Time Since The Financial Crisis

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China’s consumer price index (CPI) unexpectedly tumbled to -0.5 percent year on year (Y/Y) in November, below market expectations and the first year-over-year decline in consumer prices since the financial crisis, according to the National Bureau of Statistics (NBS).

While rapid decline of food prices continued to be the main driver for lower headline CPI inflation, non-food inflation also edged down to -0.1 percent yoy from 0 percent yoy in October.

Analysts are questioning how much of China’s now deflation is the result of the surging yuan, and how much longer will Beijing tolerate the soaring currency (or, said otherwise, the plunging dollar).

According to Goldman, headline Chinese CPI may remain at low levels in the coming months on falling food prices and a high base while PPI inflation could rise further as inflationary pressures continue to build in the industrial sector.

A bigger problem for China is that while producer price index (PPI) may be rising, it’s only a function of higher commodity prices and industrial strength on the back of massive credit injections; meanwhile consumer deflation is starting to emerge as a major concern for a country that has not had a negative CPI print since 2009.

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