Chinese Inflation Decelerates

Although the headlines focus on yoy inflation, producer prices decelerated for the second consecutive month. PPI inflation was running ~20 percent annualized at the end of 2016. In February, the annualized pace of increase is 7 percent, below the headline figure. Month-to-month numbers are volatile. This could be a pause within a larger bull market in commodities. A rebound in Chinese credit growth could carry inflation much higher. But for now, prices are on a downtrend or stabilizing. Ignoring yuan depreciation, crude oil prices will stop being inflationary by May or June.

Since consumer prices only jumped 1.0 percent at Spring Festival, versus 1.6 percent in 2016, the CPI slumped to 0.8 percent yoy. The CPI was negative 0.2 percent in February.

NBS: 2017年2月份工业生产者出厂价格同比上涨7.8%
NBS: 2017年2月份居民消费价格同比上涨0.8%

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