China Headed for Headline Deflation

Barring a sudden reversal, the PPI will fall below negative 1 percent by September or October.

How strong is deflation? The CPI fell 0.1 percent despite high food prices. That said, headline should come down as 12-month comparisons improve. Fresh fruits still ripping higher, up 5.1 percent in June alone. Vegetables fell 9.1 percent though, and egg prices dipped as well. The govt reports an overall 0.1 percent decline in food prices for June. A 3.5 percent decline in transportation fuel prices also helped pull the CPI below zero for June.