China: Inflation stabilizes in December
Consumer prices were flat over the previous month in December, below November’s 0.4% increase. The print mostly reflected a decline in food prices, especially for pork. The month-on-month decline in pork prices suggests that they could be gradually returning to normal levels. That said, pork prices are still up 97.0% compared to December 2018.
That said, Ting Lu, Lisheng Wang and Jing Wang, economists at Nomura, warn that:
“Given the continued spread of ASF (African swine fever), the sharp contraction of hog stocks, the near-term unavailability of an effective ASF vaccine and the Chinese lunar new year (LNY) effect in January, we expect wholesale pork prices to rise further in January and remain elevated in a range of RMB45-60/kg in H1 2020. We expect CPI inflation to rise to around 5.3% y-o-y in January 2020, hover above 4% y-o-y in H1 2020, and then drop to around 2.0% towards January 2021.”
Inflation stabilized at November’s 4.5% in December. The print was below market analysts’ expectations of 4.7%. Annual average inflation rose from 2.7% in October to 2.9% in December.
Annual producer prices (PPI), meanwhile, fell 0.5% year-on-year in December. The print was above November’s 1.4% but broadly in line with the 0.4% drop that market analysts had expected.