China: PPI inflation edged down, mainly due to weakening domestic demand – Nomura

Analysts at Nomura note that China’s PPI inflation edged down 0.1 percentage points (pp) to 4.6% y-o-y in July (Consensus and Nomura: 4.5%), above its average reading in H1 (3.9%) but lower than in 2017 (6.3%).

Key Quotes

“The moderation was led by upstream sectors as domestic demand continues to weaken and favourable base effects which underpinned solid PPI inflation in Q2 subsided in July.”

“PPI inflation in the processing sector moderated by 0.5pp to 4.1% y-o-y in July, while the mining and raw materials sectors both saw increases, up 1.9pp and 0.2pp, respectively, to 13.4% y-o-y and 9.0%.”

“Specifically, it fell in ferrous metal processing and nonferrous metal processing industries, which contributed to a combined ~0.31pp subtraction to the year-on-year headline number, more than offsetting the rise in the petroleum & natural gas extraction and petroleum & coal processing industries.”

“On a month-on-month basis, PPI inflation edged down further by 0.2pp to 0.1% in July.”