China’s April CPI is +0.3% year-on-year (expected to be +0.1%), PPI is -2.5% (expected to be -2.3%)

For y/y data:

CPI +0.3%

• Continue efforts to overcome deflation
• This is the third consecutive month that the CPI is above zero year-over-year
• Forecast +0.2%, previous +0.1%

PPI -2.5%

• Severe deflation has continued since October 2022
• Forecast -2.3%, previous -2.8%

A slight increase in the CPI is good news for China and should be positive for the Chinese market and Chinese proxies such as the Australian dollar.

Stay tuned for an active week from China, with the People’s Bank of China’s Medium Term Lending Facility (MLF) rate decision scheduled for Wednesday. No rate changes are expected. If the PBOC were to make cuts, it is likely that the Reserve Reserve Ratio (RRR) would be cut first. If we actually cut lending rates, the interest rate differential with other countries (damn… America) would widen, putting even more pressure on the renminbi. However, if the economy continues to weaken, the central bank may be forced to cut interest rates in the coming months. “Green sprouts” are displayed (Last week’s trade data have been a welcome improvement), but they have been sporadic and the debt-ridden real estate sector remains a major drag.

This screenshot is from the economic calendar and is CPI year over year. The CPI scale is on the right and it’s a little hard to see, but I’ve put a box around the zero point to make it a little easier to see.