China Consumer Prices Fall by 0.8% Year-over-Year in January

Highlights

• Consumer prices fell at a more marked pace year-on-year in January.
• Producer price figures provided relief, as the rate of decline in producer prices abated in January.
• Later in the session, US Fed speakers and US labor market data warrant investor attention.

On Thursday, the Chinese economy was in the spotlight again. Amidst lingering concerns about economic growth prospects, inflation figures from China garnered investor interest.

China Inflation Numbers Send Mixed Signals

Consumer prices declined by 0.8% year-over-year in January compared to a 0.3% decline in December. Economists forecast consumer prices to fall by 0.5% year-over-year in January. Consumer prices increased by 0.3% month-on-month after rising by 0.1% in December. Economists expected consumer prices to increase by 0.4%.

However, producer prices declined by 2.5% year-over-year, compared to 2.7% in December. Economists forecast producer prices to fall by 2.6% year-over-year in January.

The better-than-expected producer price figures offset the impact of the larger-than-expected fall in consumer prices year-over-year.

A slowing rate of decline in producer prices could signal a pickup in the demand environment. Producers increase prices in a less competitive environment, passing costs onto consumers.

AUD/USD Reaction to Inflation Numbers from China

Before the inflation figures from China, the AUD/USD fell to a low of $0.65165 before rising to a high of $0.65280.

However, in response to the inflation numbers, the AUD/USD rose to a high of $0.65298 before falling to a low of $0.65238.

On Thursday, the AUD/USD was up 0.08% to $0.65254.

Next Up

On Thursday, US labor market data will warrant investor attention. Economists forecast initial jobless claims to fall from 224k to 220k in the week ending February 3.

However, FOMC member speeches also need consideration. FOMC voting member Thomas Barkin is on the calendar to speak. FOMC member Barkin spoke on Wednesday, calling for patience on cutting interest rates.