China October inflation data prints today. Headline CPI is expected to ease to 2.4% from 2.8% (the range of forecasts is 2.0-3.0%). For PPI, the consensus is -1.5% (with a range of +1.0 to -1.7%).

• Outside of food inflation, CPI pressures have been fairly modest. With pressure on the food front expected to moderate this should help ease overall CPI pressures. Recall last month that core inflation eased to 0.60% y/y, fresh lows back to early 2021.
• On the PPI side, upstream price pressures are expected to be weighed on by base effects. Last October the y/y print was +13.5%. Still, weakness in the property sector, coupled with softer onshore commodity prices (like steel etc) is also expected to present a headwind.
• Weaker inflation pressures, all else equal, argues for looser financial conditions overall in China. The chart below plots the PPI y/y, 6 months forward. against the CNY NEER (J.P. Morgan Index).
• The CNY NEER is already in negative y/y territory based off further weakness in November (down another -0.81% from end October levels).

Fig 1: China PPI Y/Y Versus CNY NEER Y/Y

Source: J.P. Morgan/MNI - Market News/Bloomberg