More folks following the MB lead. TSLombard with the notes:
Energy and property crises dominate the outlook
The PPI soared to10.7% yoy in September and a further increase is likely this month to12-13%.In response to shortages of coal and electricity, the National Development and ReformCommission mandated important reforms in power pricing that, in Premier Li Keqiang’s words, bring “a market approach to stabilizing the price level”. All electricity generated by coal-fired plants will be sold at market-determined prices with a cap of 20% vs the benchmark, while prices paid by energy-intensive industries will have no price cap. These measures will result in a likely20% rise in overall electricity costs for businesses, although prices for consumers and agriculture will remain fixed. But the spillover of these changes to the CPI will be limited, largely owing to continued deflation in pork prices: the CPI fell to 0.7% yoy in September, from 0.8% inAugust, as prices for food were down 5.2% yoy and for pork 46.9%. Non-food inflation is running at 2% yoy and we expect the CPI to end the year at around 2% as food prices normalize.
