China’s CPI inflation slowed for the fourth consecutive month to 0.1% y/y in Dec and was flat on a m/m comparability. The PPI deflation eased to -2.3% y/y in Dec whereas momentum eased to fall -0.1% m/m as a result of elements reminiscent of manufacturing offseason and worldwide commodity value fluctuations, UOB Group’s Economist Ho Woei Chen notes.
Weak value stress led by decline in meals costs
“China’s inflation has remained subdued for the second straight yr in 2024 with the headline and core inflation at 0.2% (2023: 0.2%) and 0.5% (2023: 0.7%) respectively. China’s PPI recorded its second full yr contraction at -2.2% in 2024 (2023: -3.0%). We keep our forecast for 2025 CPI inflation at 0.9% and PPI deflation at -1.2%.”
“The federal government’s stimulus has but to offer a significant carry to personal consumption and costs. China’s 4Q24 GDP due subsequent Fri (17 Jan) is prone to see nominal progress weighed down by weak costs whereas we anticipate the true GDP progress to speed up to five.0% y/y (1.9% q/q) from 4.6% y/y (0.9% q/q) in 3Q24 with full-year 2024 progress at 4.9%.”
“We keep our 2025 GDP progress forecast at 4.3%. Thus, we anticipate an extra 50-100 bps discount to the RRR and 30 bps reduce to the benchmark 7-day reverse repo price (with mortgage prime charges to fall by 30 bps) in 2025. A near-term RRR reduce can be in focus after the PBOC skipped a reduce in Dec which it had flagged earlier.”
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