A rebound in headline CPI toward consensus would ease immediate deflation concerns without altering the broader policy picture, given the move is expected to be driven by a food price base effect rather than a genuine demand recovery. A miss, echoing July’s shortfall against forecasts, would revive questions about the durability of domestic consumption and keep pressure on Beijing to lean further into stimulus. PPI is the more closely watched leg for traders positioning around industrial demand, with a firmer print supporting the narrative that factory-gate deflation is easing even as second-round pass-through to consumer prices remains weak. The yuan is the most directly exposed currency to the print, while the Australian dollar carries some indirect sensitivity as a China growth proxy (check this out for China impact!), though the reaction in both is likely modest given the numbers are largely priced.
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Economists expect China’s inflation gauges to firm in August, but the rebound looks more like a food-price base effect than a genuine turn in demand.
Summary:
August CPI forecast to rise to around 0.9% y/y, up from July’s five-month low of 0.5%, on a pork and vegetable price recoveryAugust PPI forecast to firm to around 3.2% y/y, continuing the gradual easing in factory-gate deflationComes a day after customs data showed August exports up 25% y/y, in line with forecasts and quickening from July’s 23.9% paceImports rose 28.2% y/y, faster than July but short of the 30% consensus, keeping the trade surplus widening to $119.1 billionNBS manufacturing PMI improved to 49.8 in August, still below the 50 expansion line but with output and new orders back in growthNBS non-manufacturing PMI held flat and soft at 49.0, weighed down by a construction slowdown attributed partly to weather
China’s National Bureau of Statistics is due to release August inflation data, with economists expecting a rebound in the headline consumer price index to around 0.9% year on year, up from July’s five-month low of 0.5%, which itself had undershot forecasts. The anticipated pickup is being attributed largely to a recovery in food prices, particularly pork and vegetables, alongside firmer domestic refined oil prices, rather than any broad-based strengthening in consumer demand.
Producer prices are forecast to firm to around 3.2% year on year, extending a gradual easing in factory-gate deflation. Forward guidance from economists points to headline inflation settling near 1% in September before easing again to around 0.8% in October, suggesting today’s expected rebound is being read as a near-term bounce rather than a durable shift in the inflation trend.
The inflation print lands a day after customs data showed China’s trade performance splitting sharply along familiar lines. Exports rose 25% year on year in August, in line with forecasts and a step up from July’s 23.9% pace, driven by strong overseas demand for autos and high-tech goods including semiconductors. Imports climbed 28.2% year on year, an acceleration from July but short of the 30% consensus, a shortfall economists have flagged as evidence that domestic demand remains comparatively tepid even as the headline growth rate continues to look strong. The gap between the two pushed China’s trade surplus to $119.1 billion, up from $112.5 billion in July.
That export strength versus softer import momentum has been a persistent theme through the PMI data as well. The official NBS manufacturing PMI rose to 49.8 in August from 49.2 in July, still in contraction territory for a second straight month but with underlying detail improving: output and new orders both returned to expansion, and new export orders followed suit, while employment remained the weak spot. The private RatingDog manufacturing gauge, which skews toward smaller, export-oriented firms, told a stronger story again, climbing to 51.5 from 50.9 and extending a new-orders growth streak now running 15 months. By contrast, the NBS non-manufacturing PMI, covering services and construction, held flat and soft at 49.0, with Beijing attributing part of the construction slowdown to extreme weather.
Taken together, the trade and PMI data reinforce the picture that today’s inflation numbers are likely to confirm, an economy where external demand continues to outperform, while the domestic consumption and services side of the ledger stays comparatively fragile. That divergence keeps pressure on policymakers to lean further into measures aimed at boosting household spending, even as the export engine continues to do the heavier lifting for headline growth.
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This article was written by Eamonn Sheridan at investinglive.com.