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Inflation landscape

Today is inflation day in the US, and the consensus expectation is that headline #cpi will show an increase to 3.3% YoY, thanks to the base effect of comparing to the second half of ‘22. But the real story has been in #china where the latest inflation data showed a negative reading for #cpi (-0.3%) and PPI shrank by 4.4% YoY as you can see in the chart below. The fact that China is going through a slight deflation should help the west in bringing the cost of living down, but if they decide to inject money into their economy through economic stimuli to jump start it, inflation will pick up again and it may be exported to the U.S. and other trade counterparts. Oil and gas are ramping up again and grains have also rebounded recently, so deflation in China might be temporary if they can control the effect of real estate declining prices.

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Chart source: Bloomberg.

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