Mild Inflation, But No Further Easing Of Monetary Policy Envisaged

Economic Research	09 August 2016
China
Economic Highlights
Mild Inflation, But No Further Easing Of Monetary Policy Envisaged China’s CPI edged down in Jul 2016 due to easing food inflation, which was dragged down by  softening meat prices. The PPI, however, surprised the market on the upside amid rapid rebound of commodity prices in the month. Looking ahead, improved weather condition may help to cool down vegetable prices. Meanwhile, more supplies of live hogs and a high base effect could drag down meat prices further. As such, the headline CPI will likely stay at low levels in 3Q16, before moving up slightly in 4Q16 given a lower comparable base. For PPI, we believe the rebound will continue. Although demand recovery remains muted, easing monetary environment and a low base effect will likely drive up the index in the coming months. Economist:  Zhang Fan| +8621 6288 9611 ext 105
To access our recent reports please click on the links below: 08 Aug: Another Set of Weak Trade Data With No Fundamental Improvement 01 Aug: More Targeted Stimulus Expected To Help Weakening Industrial Sector 18 July: Downside Pressure Persists 13 July: Mounting Uncertainties Undermine China’s Trade Conditions 11 July: Severe Flooding Brings Near-Term Upside Risk For CPI 01 July:  Slower Manufacturing PMI As Demand Weakens