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China Consumer Prices Rise by 0.2% but the PPI Signals Weak Demand

By:
Bob Mason

China inflation figures sent mixed signals this morning. While consumer prices rose by more than expected, the producer price index signaled weak demand.

China Consumer Inflation and Producer Price Index - FX Empire

In this article:

Highlights

  • China consumer price inflation and producer price index numbers for July drew interest this morning.
  • A less-marked decline in the producer price index and a larger-than-expected rise in consumer prices offered brief relief.
  • Later today, Fed chatter will draw interest ahead of the US CPI Report tomorrow.

It was another testy start to the day for the Asian markets. After the disappointing trade data from China, consumer price inflation and producer price index figures from China drew interest this morning.

Consumer prices fell by 0.3% year-over-year in July after stalling in June. Economists forecast a 0.4% decline, signaling weak consumer demand. However, consumer prices increased by 0.2% in July, reversing a 0.2% decline in June. Economists forecast a 0.1% increase.

Producer price index figures also influenced market risk sentiment. On Tuesday, trade data from China highlighted the weak demand environment suggesting further downward pressure on producer prices.

However, the producer price index fell by 4.4% year-over-year, following a 5.4% decline in June. Economists forecast a 4.1% decline.

While the producer price index declined at a less marked pace in July, the 4.4% fall reflected the ongoing weakness in global demand, aligned with the July Caixin manufacturing PMI and the latest import and export figures. Nonetheless, a possible bottoming out and a pickup in consumer prices should provide some comfort.

AUD/USD Reaction to the China Inflation Numbers

Before the China inflation numbers, the AUD/USD fell to an early low of $0.65283 before rising to a pre-stat high of $0.65449.

However, in response to the inflation figures, the AUD/USD fell to a post-stat low of $0.65373 before rising to a high of $0.65451.

This morning, the AUD/USD was down 0.01% to $0.65438.

AUD/USD responds to the inflation numbers from China.
090823 AUDUSD 30-Minute Chart

Next Up

There are no US economic indicators to move the dial this afternoon. However, investors should monitor the news wires for Fed chatter with the media ahead of the US CPI Report out on Thursday.

 

About the Author

Bob Masonauthor

With over 20 years of experience in the finance industry, Bob has been managing regional teams across Europe and Asia and focusing on analytics across both corporate and financial institutions. Currently he is covering developments relating to the financial markets, including currencies, commodities, alternative asset classes, and global equities.

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