China Trade and Inflation Numbers Hint at an Improving Demand Environment

Highlights

• Inflation figures from China signal a possible shift in demand.
• China exports jumped in December, but imports signaled a weak demand outlook.
• Later today, US producer prices and Fed chatter need consideration.

On Friday, inflation and trade data from China garnered investor interest.

China Trade Terms Turn Positive

The trade surplus for China (US dollars) widened from $68.39 billion to $75.34 billion in December. Economists forecast a $74.75 billion surplus. Significantly, exports were up 2.3% year-over-year after being up 0.5% in November. Economists forecast a 1.7% increase in exports. Imports increased by 0.2% after being down 0.6% in November. Economists forecast a 0.3% increase in imports.

The latest trade data aligned with inflation numbers from China earlier in the Friday session.

China Inflation Figures Signal an Improving Demand Environment

Inflation figures were out earlier in the Friday session.

Consumer prices increased by 0.1% in December after falling by 0.5% in November. Economists forecast consumer prices to increase by 0.2%. Year-over-year, consumer prices declined by 0.3% after being down 0.5% in November. Economists forecast a 0.4% decline in consumer prices.

Producer prices also signaled an improving demand environment, albeit modestly. Producer prices were down 2.7% year-over-year in December versus 3.0% in November. Economists forecast producer prices to fall by 2.6% year-over-year in December.

AUD/USD Reaction to the China Stats

Before the stats, the AUD/USD fell to a low of $0.66819 before rising to a high of $0.67010.

However, in response to the economic data from China, the Aussie dollar slipped to a low of $0.66973 before rising to a high of 0.67139.

On Friday, the Aussie dollar was up 0.37% to $0.67118.

Focus on US Producer Prices and the Fed’s Views on Inflation

On Friday, US producer prices also need consideration. Economists consider producer prices as leading indicators for consumer price inflation. Upward trends in producer prices could signal an improving demand environment. Producers pass rising costs onto consumers and could influence sentiment toward Fed interest rate goals.

Economists forecast producer prices to increase by 1.3% year-over-year in December. In November, producer prices rose by 0.9%.

With inflation in the spotlight, FOMC member commentary also warrants investor attention. FOMC member Neel Kashkari is on the calendar to speak on Friday. Comments on inflation and interest rates need consideration.