China’s inflation rate jumps to highest reading since November 2018
Overnight, China’s PPI rate swung from 0.3 per cent in January to 1.7 per cent in February, its highest reading since November 2018.
The surge in prices at the factory level adds weight to the argument that higher inflation is in the pipeline as increases in costs at the factory level are likely to be passed on to consumers.
“China’s February Inflation and PPI data printed at higher than expected levels,” said OANDA market analyst Jeffrey Halley, pointing out that food inflation continued easing, but healthcare costs ticked up.
“All-in-all, the China numbers will get a pass mark from local markets, with all attention on the US CPI and bond auctions this evening,” he added.
The CPI rate in China rose from -0.3 per cent to -0.2 per cent.
“Even though consumer demand appears to still be weak, it at least is improving. The PPI report is likely to resonate with traders in the West as there have been worries about higher prices recently,” commented David Madden, market analyst at CMC Markets UK, this morning.
US inflation later today
Lately, there has been a lot of talk about inflation so today’s US CPI report at 1.30pm UK time will be in focus. Economists are expecting the February reading to be 1.7 per cent, up from 1.4 per cent in January.
“The core CPI report strips out volatile components like commodity prices and the update is predicted to hold steady at 1.4 per cent,” said Madden.
Last week, Fed boss Jerome Powell, cautioned that we are likely to see inflationary pressure in the months ahead as the labour market improves, and the news pushed up the US 10-year yield, which in turn weighed on equities.
“The Federal Reserve is operating an extremely loose monetary policy and they are a long way off from looking at tightening their policy. Nonetheless, a jump in inflation is still likely to nudge up yields which will probably dent stocks,” Madden concluded.