EMERGING MARKETS WEEKLY BY LLOYDS TSB

Following a surprise moderation in annual inflation rates in December, we look for both consumer and producer prices in China to accelerate in January.

Following a surprise moderation in annual inflation rates in December, we look for both consumer and producer prices in China to accelerate in January. Growth in the wholesale price of consumer goods has been particularly strong and we look for Chinese consumer inflation to increase 5.3% y/y, compared to 4.6% in December. Higher raw material prices are also forecast to underpin a surge in producer inflation to 6.3%, from 5.9% y/y in December. If, as we expect inflation pressures continue to build over the coming months – annual inflation is forecast to remain above 5% until the spring – the PBoC is likely to come under pressure to raise rates further or allow a faster rate of yuan appreciation.

Full Report