Chinese inflation to crash in due course

Chinese inflation was out yesterday and it is a laugh a minute. The CPI is cratered at 0.7% as food prices sag:

However, that is not where the action is. It’s producer inflation that delivers the laughs, at 10.7%:

And have a look at what is running:

Basically, the further upstream in the supply chain that you go, the worse the inflation gets. It is ALL commodities. In particular, coal, Goldman:

Year-over-year PPI inflation rose to +10.7% yoy in September from +9.5% yoy inAugust, largely on high sequential growth. In month-over-month terms, PPI increased8.3% (seasonally adjusted annualized rate) in September (vs. 7.5% in August). PPI inflation in producer goods rose to +14.2% yoy in September from +12.7% yoy in August, and PPI inflation in consumer goods edged up to +0.4% yoy in September (vs.+0.3% yoy in August). Among major sectors, in seasonally adjusted annualized month-over-month terms, inflation in coal mining increased the most, i.e. increased to+230.5% in September from +118.9% in August, followed by non-metal product, petroleum/coking and non-ferrous smelting sector, while inflation in the chemical fiber sector decreased the most, i.e. fell to -28.1% in September from +21.4% in August, followed by ferrous metal and petroleum mining sectors in September.

This inflation is going to return from whence it came in due course. And when the retracement starts, just as quickly.

Houses and Holes

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