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Bad Signs with China’s Spiralling PPI Inflation

Producer prices in China are developing an acceleration, prompting a reaction from the authorities. Annual producer price inflation accelerated to 9% in May. This is the fastest rate since September 2009.

Bad Signs with China’s Spiralling PPI Inflation

Both then and now, it is more of a low-base effect. However, the renminbi has strengthened by 10% over the past year, which dampens inflation. Without this factor, China would have faced a much greater inflationary pressure.

So far, the jump in producer prices is in no hurry to translate into consumer price inflation, which only rose to 1.3% in May instead of the expected 1.6%.

From being an exporter of deflation, China could become an exporter of inflation. It is struggling with this by announcing price controls on several products (pork, wheat, corn), and before that, there have been attempts to bring down the price rises of metals and coal.  

In addition, accelerating inflation in China is an essential indicator for prices in the US, where the CPI will be released tomorrow and the PPI next Tuesday. To what extent are prices under control there?

Source: FXPro


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