Thread by @Trinhnomics

China CPI rose to 2.8% from 2.7%YoY & expectations of 2.7%. PPI WORSE TO -0.3% YoY from 0% and expectations of -0.1%YoY.

That means expectations of help coming to stabilize the economy 😬

Note that the rise of CPI will make it a very delicate balancing act between making sure that higher food inflation isn't going to go higher. That said, the contraction of PPI just means profitability of firms are LOWER. What to do? How to help w/ FX, rates. guidance & fiscal👇🏻

PPI stands for producer price index & prices are contracting (down cycle happening) & help is definitely needed (this is why the 5 August Monday CNY fix was weak b/c China wants to export DEFLATION). CPI higher on food issues so CPI a hurdle for rate cuts for China but PPI isn't.

China may have a manufacturing surplus but despite being a massive producer of food (veggies & protein), it is a NET IMPORTER OF FOOD. This is why it invests in Australia - not just for hard but also soft commodities.

W/o food from the US, China'll need to sort out food sources.

In the latest PBOC household survey, higher COSTS OF LIVING is a major concern in China. And this concern is warranted as CPI rises - CPI stands for consumer price index. It is a weighted basket on key consumption items & price change. Employment is a concern too for households.

Note that the contraction of PPI by -0.3%YoY is in line w/ the following data:
a) Industrial profits (contracting)
b) Manufacturing PMI (contracting but stabilizing)
c) Imports contracting.

As I mentioned in that video - China slowdown happening & is CONSEQUENTIAL for us all.

Finally, in the manufacturing PMI sub-component, employment was contracting in July. So this PPI tells you that if producers are seeing prices CONTRACTING then they will do the following:
a) REDUCE COSTS & that means REDUCE HEADCOUNT DEMAND
b) That will spill over to services.

It has already spilled over to services as the PMIs (gov+ Caixin) tell u that services are expanding at a SLOWER PACE. Here we are. China slowdown confirmed. That means that u should buckle your seat belt, esp if you are Korean exporters. No help coming from China this time. Yep.

Do you remember this song in 2015/2016? Of course u do if u got kids b/c man it is played like 2bn times. The question at the time & the question this time around too is: will the PBOC LET IT GO 🎵🎶🎙️🕊️🕊️🕊️

(I'm talking about the CNY/CNH not Frozen😎)

Wuuuuuuat? They got a multi-lingual version??? Japanese & Spanish & Mandarin & Bahasa? Cool! 🥰

So global like the implication of the PBOC decision on whether to LET THE YUAN GO 🌏🌍🌎

🥁🥁🥁🥁

Okay, jokes aside, here are the details of CPI & PPI.

CPI: Food up 9.1% YoY & non-food only 1.3% (oil/transport down). Basically core CPI is down so food is a huge source of inflation.

PPI: Raw materials, manufacturing and durables CONTRACTING.

Real economy is slowing👇🏻👇🏻