Analyst
Analyst
Inflation Above Consensus On Upstream Strength
- China's August headline CPI inflation rose to 0.8% yoy (+0.3ppt mom), in line with Bloomberg consensus, lifted by transportation and communication inflation (2.5% yoy, +2.1ppt mom). Core CPI inflation edged up to 1.0% yoy (+0.1ppt mom), slightly above Bloomberg consensus of 0.9% yoy, with goods inflation at 0.8% yoy (+0.6ppt mom) and services inflation at 0.8% yoy (+0.1ppt mom).
- PPI inflation reaccelerated to 3.8% yoy (+0.3ppt mom), above Bloomberg consensus of 3.6% yoy, as producer goods PPI inflation firmed to 5.0% yoy (+0.2ppt mom) on mining and quarrying inflation (17.8% yoy, +1.4ppt mom), while consumer goods PPI deflation narrowed to -0.5% yoy (+0.3ppt mom).
- Overall, the data is mildly positive for markets, as the upside surprise eases near-term deflation risk. Margin pressure eased slightly but remains persistent. Looking ahead, investors should watch for signs of a recovery in downstream pricing power.
Our View
- August headline CPI inflation rose to 0.8% yoy (+0.3ppt mom), in line with Bloomberg consensus. The pickup was led by transportation and communication inflation, which rebounded to 2.5% yoy (+2.1ppt mom) as fuel cost pass-through resumed after fading in July. Food deflation narrowed to -1.4% yoy (+0.1ppt mom), while food, tobacco and liquor deflation eased to -0.7% yoy (+0.1ppt mom). Notably, other products and services inflation accelerated to 7.3% yoy (+1.5ppt mom) whereas medical-related articles inflation pull backed slightly to 2.7% yoy (-0.2ppt mom). Core CPI inflation edged up to 1.0% yoy (+0.1ppt mom), slightly above Bloomberg consensus of 0.9% yoy, with goods inflation rebounded to 0.8% yoy (+0.6ppt mom) and services inflation at 0.8% yoy (+0.1ppt mom).
- PPI inflation reaccelerated to 3.8% yoy in August (+0.3ppt mom), above Bloomberg consensus of 3.6% yoy, reversing July's moderation. Producer goods PPI inflation firmed to 5.0% yoy (+0.2ppt mom), led by mining and quarrying inflation at 17.8% yoy (+1.4ppt mom) and raw materials inflation at 6.7% yoy (+0.6ppt mom). Consumer goods PPI deflation narrowed to -0.5% yoy (+0.3ppt mom), with durable consumer goods PPI inflation strengthening to 1.2% yoy (+0.8ppt mom), though food and clothing PPI deflation deepened to -2.3% yoy (-0.2ppt mom) and -1.2% yoy (-0.1ppt mom), respectively. Meanwhile, Purchasing Price Index inflation rose to 5.8% yoy (+0.3ppt mom), reflecting a broad-based firming across sub-components, with eight of the nine categories improving mom. Among them, non-ferrous metal materials and wires inflation rose to 19.8% yoy (+0.8ppt mom) and building materials and non-metallic deflation narrowed to -3.2% yoy (+0.9ppt mom), while ferrous metal materials inflation slowed to 0.3% yoy (-1.1ppt mom).
- Overall, the August data was mildly market positive, with upstream reflation resuming, easing concerns on a return to deflationary environment. However, downstream margins remain under pressure, while the goods-led CPI increase points to continued cost-push inflation. Looking ahead, investors should watch for signs of a recovery in downstream pricing power, with consumer goods PPI inflation turning positive being the clearest confirmation.
Inflation Above Consensus On Upstream Strength
- China's August headline CPI inflation rose to 0.8% yoy (+0.3ppt mom), in line with Bloomberg consensus, lifted by transportation and communication inflation (2.5% yoy, +2.1ppt mom). Core CPI inflation edged up to 1.0% yoy (+0.1ppt mom), slightly above Bloomberg consensus of 0.9% yoy, with goods inflation at 0.8% yoy (+0.6ppt mom) and services inflation at 0.8% yoy (+0.1ppt mom).
- PPI inflation reaccelerated to 3.8% yoy (+0.3ppt mom), above Bloomberg consensus of 3.6% yoy, as producer goods PPI inflation firmed to 5.0% yoy (+0.2ppt mom) on mining and quarrying inflation (17.8% yoy, +1.4ppt mom), while consumer goods PPI deflation narrowed to -0.5% yoy (+0.3ppt mom).
- Overall, the data is mildly positive for markets, as the upside surprise eases near-term deflation risk. Margin pressure eased slightly but remains persistent. Looking ahead, investors should watch for signs of a recovery in downstream pricing power.
Our View
- August headline CPI inflation rose to 0.8% yoy (+0.3ppt mom), in line with Bloomberg consensus. The pickup was led by transportation and communication inflation, which rebounded to 2.5% yoy (+2.1ppt mom) as fuel cost pass-through resumed after fading in July. Food deflation narrowed to -1.4% yoy (+0.1ppt mom), while food, tobacco and liquor deflation eased to -0.7% yoy (+0.1ppt mom). Notably, other products and services inflation accelerated to 7.3% yoy (+1.5ppt mom) whereas medical-related articles inflation pull backed slightly to 2.7% yoy (-0.2ppt mom). Core CPI inflation edged up to 1.0% yoy (+0.1ppt mom), slightly above Bloomberg consensus of 0.9% yoy, with goods inflation rebounded to 0.8% yoy (+0.6ppt mom) and services inflation at 0.8% yoy (+0.1ppt mom).
- PPI inflation reaccelerated to 3.8% yoy in August (+0.3ppt mom), above Bloomberg consensus of 3.6% yoy, reversing July's moderation. Producer goods PPI inflation firmed to 5.0% yoy (+0.2ppt mom), led by mining and quarrying inflation at 17.8% yoy (+1.4ppt mom) and raw materials inflation at 6.7% yoy (+0.6ppt mom). Consumer goods PPI deflation narrowed to -0.5% yoy (+0.3ppt mom), with durable consumer goods PPI inflation strengthening to 1.2% yoy (+0.8ppt mom), though food and clothing PPI deflation deepened to -2.3% yoy (-0.2ppt mom) and -1.2% yoy (-0.1ppt mom), respectively. Meanwhile, Purchasing Price Index inflation rose to 5.8% yoy (+0.3ppt mom), reflecting a broad-based firming across sub-components, with eight of the nine categories improving mom. Among them, non-ferrous metal materials and wires inflation rose to 19.8% yoy (+0.8ppt mom) and building materials and non-metallic deflation narrowed to -3.2% yoy (+0.9ppt mom), while ferrous metal materials inflation slowed to 0.3% yoy (-1.1ppt mom).
- Overall, the August data was mildly market positive, with upstream reflation resuming, easing concerns on a return to deflationary environment. However, downstream margins remain under pressure, while the goods-led CPI increase points to continued cost-push inflation. Looking ahead, investors should watch for signs of a recovery in downstream pricing power, with consumer goods PPI inflation turning positive being the clearest confirmation.
Analyst
Analyst
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