A timely note from JP Morgan on inflation, this snippet on China:

  • the domestic economy is grappling with deflation
  • “Multiple factors have contributed to deflationary pressure in China, including global commodity price declines, food price drags and policy support for supply rather than demand”
  • “However, we expect deflation will end but low inflation will stay in place in 2024.”
  • Volatile pork prices have been the key driver of food deflation in China. However, the annual change in live pig stock, which tends to lead pork prices by three to six months, has stabilized in recent times.
  • Plus, with oil prices expected to stay range-bound at around $83/bbl in 2024, deflationary pressures from imported energy prices will likely ease in the coming months.

JPM look out for the rest of the year:

  • “In the absence of a shift in policy direction from supporting supply to demand, the asymmetric recovery in retail sales and industrial production will stay in place, constraining room for core CPI to turn up. The inflation impulse from China’s reopening will also gradually fade into next year”
  • “Taken together, we expect headline CPI inflation to trend up modestly to 0.9% year-over-year on average in 2024, and core CPI inflation to reach 1.2%.”

I posted earlier on the Chinese data due today, here:

Economic calendar in Asia 08 February 2024 2