China’s mad steel inflation

Chinese inflation is out and boy is it odd as the PPI soars as expected, hitting 7.8%, while the CPI cratered to just 0.8% year on year:

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For the CPI the culprit was vegies and eggs which collapsed:

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Meanwhile, steel and inputs plus energy drove nearly all of the producer inflation:

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Such narrow inflation does not speak very well for the global reflation trade. I mean, sheesh, the ferrous complex boom was basically the result of a series of policy errors. And here we see the result with virtually no price pass through anywhere in the production chain.

In short, China has just sent global markets a massively false reflation signal and once this baby passes global lowflation will be back with a vengeance.

Do not sell those bonds!