Inflationary readings from China were the key point of the Asian session. Both PPI and CPI for February were released and there is a significant divergence between two readings. It’s interesting in the context of Lunar New Year celebration.
CPI has dramatically decelerated to 0.8% y/y with expectations at 1.7&% and the prior reading at 2.5%. Such a slowdown could be explained by stronger juan. Renminbi has stabilized since the end of January. Inflation hasn’t risen despite strong consumption associated with New Year’s celebration. Yesterday’s data has shown a stron rise of imports in February. Consumer prices haven’t reacted though as it’s been caused mainly by the rise of commodities prices (influencing mainly producer prices). The base effect is important as well due to New Year celebrations (it started in February last year so the base in January was big).