China: Inflation expected to pick up pace in 2021 – UOB

UOB Group’s Economist Ho Woei Chen, CFA, assessed the latest inflation figures in the Chinese economy.

Key Quotes

“China’s headline inflation eased sharply to 11-year low in October as food prices came off further. However, the core inflation has remained steady while services inflation edged higher, supporting a more positive outlook as demand recovers. With a high base of comparison, the headline inflation will remain subdued in 4Q20 and we now expect full-year 2020 inflation at 2.6% vs. 3.0% previously. We maintain our outlook for inflation to pick up to 3.0% in 2021 on stronger global economic recovery next year.”

“Producer Price Index (PPI) was unchanged at -2.1% y/y in October. On a month-on-month comparison, PPI was flat after four preceding months of gains. PPI deflation is likely to continue in the coming months but may narrow with firming global demand and commodity prices.”