11 Mar 2015
China: Inflation likely to remain low despite Feb rebound - Nomura
FXStreet (Bali) - China's CPI inflation bounced in February
on seasonal factors, notes the Asian Economics Team at Nomura, adding that inflation is likely to remain low despite February rebound.
Key Quotes
"China’s CPI inflation rebounded more than expected to 1.4% y-o-y in February from 0.8% in January (Consensus: 1.0%; Nomura: 1.1%), largely due to a reversal of the Lunar new year effect. Average CPI inflation in January-February was 1.1% y-o-y, down from 1.5% in December, largely reflecting weaker domestic demand, consistent with a sharp 15.5% drop in ordinary imports (excluding key commodities) in January-February (see China: A new record high trade surplus in February, 8 March 2015)."
"PPI deflation worsened further to 4.8% y-o-y from 4.3% (Consensus: 4.3%; Nomura: 4.4%), reflecting lower commodity prices and a worsening of overcapacity in upstream industries. Although commodity prices rose in February on a month-on-month basis, they are still down on a year-on-year basis – e.g., Brent crude rose by 20.7% m-o-m in February, but fell 46.7% y-o-y."
"We continue to expect inflation to remain relatively low and still see disinflationary pressures in the economy. We maintain our view of growth slowing to 7.1% y-o-y in Q1 from 7.3% in Q4 2014, and to 6.8% in 2015. To offset headwinds to economic growth, we expect monetary policy to be loosened further and we maintain our call for one 25bp benchmark rate cut in Q2 and three 50bp reserve requirement ratio cuts (one in each quarter) in the rest of the year."
on seasonal factors, notes the Asian Economics Team at Nomura, adding that inflation is likely to remain low despite February rebound.
Key Quotes
"China’s CPI inflation rebounded more than expected to 1.4% y-o-y in February from 0.8% in January (Consensus: 1.0%; Nomura: 1.1%), largely due to a reversal of the Lunar new year effect. Average CPI inflation in January-February was 1.1% y-o-y, down from 1.5% in December, largely reflecting weaker domestic demand, consistent with a sharp 15.5% drop in ordinary imports (excluding key commodities) in January-February (see China: A new record high trade surplus in February, 8 March 2015)."
"PPI deflation worsened further to 4.8% y-o-y from 4.3% (Consensus: 4.3%; Nomura: 4.4%), reflecting lower commodity prices and a worsening of overcapacity in upstream industries. Although commodity prices rose in February on a month-on-month basis, they are still down on a year-on-year basis – e.g., Brent crude rose by 20.7% m-o-m in February, but fell 46.7% y-o-y."
"We continue to expect inflation to remain relatively low and still see disinflationary pressures in the economy. We maintain our view of growth slowing to 7.1% y-o-y in Q1 from 7.3% in Q4 2014, and to 6.8% in 2015. To offset headwinds to economic growth, we expect monetary policy to be loosened further and we maintain our call for one 25bp benchmark rate cut in Q2 and three 50bp reserve requirement ratio cuts (one in each quarter) in the rest of the year."