Morning Brief – China Data

The main focus during the Asian session was China data as the US dollar gave back some of Friday’s gains and stocks remained soft. China’s finance ministry after US Treasury secretary Yellen’s visit to Beijing last week said they agree to keep high-level exchanges with US after Yellen visit.

On the data front, inflation was in favour China’s consumer prices unexpectedly were flat in June 2023, compared with market expectations and May’s figure of a 0.2% rise.

This was the lowest reading since a deflation in February 2021, mainly due to a decline in non-food prices (-0.6% vs flat reading in May) with cost of transport declining further (-6.5% vs -3.9% in May) while that of education slowed.

Also, inflation was stable for health while prices of housing were unchanged after declining 0.2% previously. Food prices, meanwhile, rose the most in three months, due to a rebound in cost of both fresh vegetables and eggs and despite a sharp fall in pork prices.

Core consumer prices, excluding the volatile prices of food and energy, went up 0.4% yoy, the least since March 2021, after a 0.6% gain in May. On a monthly basis, consumer prices unexpectedly dropped by 0.2%, the fifth straight month of falls, and compared with consensus of a flat print.

China’s producer prices dropped 5.4% yoy in June 2023, steeper than a 4.6% fall in the prior month and worse than market forecasts of a 5.0% decline. It was the ninth straight month of producer deflation and the fastest fall since December 2015 amid weakening demand and moderating commodity prices.

A decrease in production materials quickened due to a faster decline in processing prices, raw materials, and extractions. At the same time, consumer goods prices fell further (-0.5% vs -0.1%) amid decreases in prices of food (-0.6% vs 0.2%), while daily use goods, and clothing continued to rise.

At the same time, the cost of durable goods dropped by 1.5% following a 1.1% drop in May. On a monthly basis, producer prices decreased by 0.8%, the third straight month of decline, after a 0.9 fall in May.