CPI increased in China, while PPI decreased

In China, the world's second largest economy, consumer inflation accelerated in December due to rising food prices, while producer prices fell. While consumer inflation in China accelerated slightly in December, the decline in producer inflation remained below analysts' expectations. According to the data released this morning, the consumer price index increased in line with expectations at 1.8 percent on an annual basis and exceeded the November data, which increased by 1.6 percent. It was expected that the producer price index, which fell by 1.3 percent on an annual basis in November, would decline by 0.1 percent. However, the decrease in PPI was 0.7 percent. Although the announcement of a decrease above expectations in producer prices reflects the negative effects of increasing Covid-19 cases on production, the fact that price declines slowed down slightly compared to the previous month was evaluated as relatively positive. Bloomberg Economics Economist Eric Zhu made the following assessment: "China's producer deflation is decreasing - not as fast as we expected, but the trend is clear. The deceleration of the decline in PPI indicates that upward pressure on ex-factory prices is beginning to emerge." On the other hand, according to Jeff Currie, Global Commodity Director at Goldman Sachs, the direction of commodity prices, especially oil, will depend on China’s reopening process after the Lunar New Year celebrations at the end of this month. If China and other Asian economies fully lift coronavirus restrictions and reopen, Brent crude could reach $110 a barrel in the third quarter, Currie said.