China: Moderate CPI rise will not affect the easing/stimulus agenda - Nomura

Analysts at Nomura note that the China’s consumer price index (CPI) inflation ticked up to 2.1% y-o-y in July from 1.9% in June and the small rise in CPI inflation was mainly driven by non-food price increases (to 2.4% yo-y from 2.2% in June) which were in turn driven by rising gasoline and diesel prices as a result of already-high global crude oil prices.

Key Quotes

“The impact of the 25% tariff on USD34bn worth of US goods should be quite small (less than 0.07% by our estimates), while the ongoing growth slowdown should limit a further rise in inflation.”

“We do not expect this moderate rise in CPI inflation to affect Beijing’s shift in its policy stance towards easing and stimulus. In fact, the still-muted inflation print provides Beijing with more room to roll out further easing/stimulus measures in an effort to arrest the growth slowdown.”