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China: September CPI and PPI Data Preview - ING

FXStreet (Delhi) – Tim Condon, Chief Economist at ING, suggests that persistently low inflation will sustain the squeeze on industrial enterprise cash flows.

Key Quotes

“September CPI and PPI data are due tomorrow at 9.30am local time. The consensus forecast for CPI inflation is 1.8% YoY (prior 2.0%). We see upside risk from another weather-related food component spike (first figure) and from the seasonal bounce in the clothing component (INGF 2.0%).”

“The consensus forecast for PPI inflation is -5.9% YoY, unchanged from August. Low oil price explains persistent PPI deflation (second figure). The 2H14 global commodity price crash drove PPI deflation to 4% from 2%. The July-August commodity price crash drove it to 5%. It’s not only commodities; deflation in the manufacturing means of production component has deepened.”

“On ING’s global oil price forecast the impact of the 2H14 and July-August 2015 commodity price crashes will start to fade in the first quarter of 2016. However, we think the intensification of PPI deflation beyond the commodity components will prevent deflation from retracing to 2% when that happens. Persistently lower inflation will sustain the squeeze on industrial enterprise cash flows.”

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