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10 Dec 2014
China concerned by deflation – Nomura
FXStreet (Barcelona) - Research Analysts at Nomura, note that China’s inflation easing more than expected to 1.4% yoy in November, the lowest since December 2009, is giving rise to deflation concerns.
Key Quotes
“China‟s CPI inflation eased by more than expected to 1.4 % y-o-y in November, from 1.6% y-o-y in October, largely reflecting weak domestic demand (Consensus: 1.6%; Nomura: 1.5%) and in line with the weak ordinary import data for November released earlier this week. This is the lowest CPI Inflation reading since December 2009.”
“Subdued inflation suggests low growth momentum in November. We expect November activity data (released this Friday) to weaken by more than the consensus expectation, with growth of industrial production slowing to 7.3% y-o-y from 7.7% in October, fixed asset investment slowing to 15.6% y-o-y (ytd) from 15.9% and retail sales declining to 11.3% from 11.5%.”
“We maintain our view that GDP growth will remain unchanged at 7.3% y-o-y in Q4, before slowing further to 6.8% in 2015.”
“We expect inflation to remain below 2% in 2015, which may raise concerns of deflation and trigger more policy easing. We expect one more interest rate cut in Q2 and one 50bp reserve requirement ratio cut each quarter in 2015.”
Key Quotes
“China‟s CPI inflation eased by more than expected to 1.4 % y-o-y in November, from 1.6% y-o-y in October, largely reflecting weak domestic demand (Consensus: 1.6%; Nomura: 1.5%) and in line with the weak ordinary import data for November released earlier this week. This is the lowest CPI Inflation reading since December 2009.”
“Subdued inflation suggests low growth momentum in November. We expect November activity data (released this Friday) to weaken by more than the consensus expectation, with growth of industrial production slowing to 7.3% y-o-y from 7.7% in October, fixed asset investment slowing to 15.6% y-o-y (ytd) from 15.9% and retail sales declining to 11.3% from 11.5%.”
“We maintain our view that GDP growth will remain unchanged at 7.3% y-o-y in Q4, before slowing further to 6.8% in 2015.”
“We expect inflation to remain below 2% in 2015, which may raise concerns of deflation and trigger more policy easing. We expect one more interest rate cut in Q2 and one 50bp reserve requirement ratio cut each quarter in 2015.”