The CPI out of China came in at a 4.9%; and whether or not long term inflation is under control, short term is better.
The National Bureau of Statistics reweighted the components in the index, bringing it in below forecasts. Combined with yesterdays import/export numbers, the China demand story keeps rolling. Inflation in China may be hard to gauge, but the demand story is consistent.
CPI forecasts had called for a gain of 5.4% with PPI rise of 6.3%. The producer price index, which rose 6.6%, rose more than anticipated. Consumer prices in December gained 4.6% year-on-year, with wholesale prices up 5.9%.
Persistent strength in China’s export sector is great news for the health of export-heavy funds like FXI (quote), while the import story favors commodity plays including food, the miners like RIO (quote) and oil.
While we are looking at China macro, take a look at the drop in money market yields after the most recent PBOC rate hike. Bank liquidity is already improving again.
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