Chinese PPI and CPI were below expectations but this may be good for companies and exports.
The National Bureau of Statistics of China released figures Tuesday morning that have caused mixed reports of possible outcomes. Whereas some see the weak CPI and PPI as a risk for deflation, others are pointing to the prospect of companies benefitting from low production prices versus relatively consistent annual goods’ prices.
Consumer Price Index (CPI) for January compared to the same period a year ago, came in at 0.8% versus expectations of 1.0% and previous of 1.5%. This is a five-year low.
This slightly lower figure is being put down to the Chinese New Year being in February - as opposed to January last year - and analysts are forecasting that the spending spree over the holiday will raise CPI due to the price of goods and services going up.
In the meantime, the Producer Price Index (PPI), which measures the change in the price of goods sold by manufacturers was at -4.3% for January year-on-year, versus expectations of -3.8% and previous of -3.3%. This was not so positive for Chinese companies as factory prices depreciate with slow demand, leading to speculation of deflation but may encourage exports.
Trading on the Asian index markets was sluggish overnight giving little notice to the Chinese data as the Japan225 [Nikkei] contracted 0.8%, and the HongKong45 [Hang Seng] made gains from 24483 at close on Monday, to trading at 24615 on Tuesday.
The Sydney200 [ASX 200 Australia] fought to gain 24 points from close on Monday at 5729 to Tuesday’s 5755. As Australia released positive data with the NAB business confidence up a whole point from 2 to 3 and the House Price Index at 1.9% for the quarter above the forecast of 1.8% and previous of 1.4%, it seems that the central bank’s decision this month to reduce the key rate to 2.25%, a record low, is boosting the housing market and fulfilling its aim to weaken the AUD and stimulate the economy. The AUDUSD is now at July 2009 levels and holding relatively steady since the interest decision on 3 February.
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