China: Prices surprised on the upside - BBH

Research Team at BBH, suggests that ahead of the US retail sales report, the main economic news has been Chinese prices, where the surprise was on the upside. 

Key Quotes

“Consumer prices rose 1.9% in the year in September after a 1.3% rise in August.  The Bloomberg median forecast was 1.6%.  Food prices are still an important driver, rising 3.2%.  Non-food consumer prices rose 1.6%. 

More noteworthy was the fact that producer prices turned positive for the first time since 2012.  The 0.1% year-over-year increase follows a 0.8% decline in August.  The Bloomberg median forecast was for a 0.3% decline.  This is important, especially after yesterday's unexpectedly weak exports.  Some fear increased risks that China will seek to export deflation.  The higher than expected inflation readings may keep such anxiety at bay (for the moment). 

That said, we note that as the onshore yuan played catch-up with the offshore yuan after last week-long holiday.  Recognizing the US dollar's strength, the yuan is recording its largest weekly loss since January.  At the start of the year, it will be recalled that Chinese developments were still shaping the investment climate and risk appetite.  Chinese stocks rose 2.0%-2.5% this week.”