A reminder that China July inflation figures print today. The market consensus for headline CPI is -0.4% y/y, versus flat in June (range of forecasts is -0.9% to 0.2%). Base effects don't help from a y/y standpoint, with the July 2022 read at +2.7% (from 2.5% in June 2022). The PPI is projected at -4.0% y/y, versus -5.4% in June (range of forecasts is -5.0% to -3.8%). Base effects are working the other way for the PPI, as the July 2022 print eased to 4.2%y/y from 6.1% in June.

• China core inflation was 0.4% y/y in June, which was fresh lows back to early 2021. The China PMIs did show some improvement in terms of input price measures, with these sub-indices ticking higher in July.
• This is also consistent with less downside y/y momentum in global commodity prices. The chart below overlays this index against the China PPI for raw materials in y/y terms. Less deflation in this sub-sector could help the headline PPI measure, all else equal.
• China officials have also been stating that inflation momentum should improve as we progress through H2 2023.

Fig 1: China PPI Raw Materials Y/Y & Global Spot Commodity Prices Y/Y

Source: MNI - Market News/Bloomberg