Reaction to the China inflation data earlier in the day
Eamonn had the data release here.
The miss is prompting a bit of a rethink by economists on China's inflation projection and Macquarie Capital Limited has lowered their CPI forecast for China to 2.0% from 2.4% for 2018.
In a client note, economists Larry Hu and Irene Wu said that:
- Lower than expected CPI and PPI prompted downward revision
- Expects CPI to fall below 2% in April
- Weaker inflation data is positive to liquidity in the bond market, implying lower odds for PBOC rate hikes
- Also suggests soft demand in the real economy, which is negative for earnings growth in coming quarters
