🇨🇳❗️Cable FX Macro Weekly Note: China Aug. Inflation

**As seen in Risk In The Week report 09/01/23, subscribe at cablefxm.co.uk/reports

Chinese consumer prices currently deflate at -0.3% Y/y, this is lower than the prior figure of 0.0% but slightly better than the consensus of -0.4%. Just a year ago, consumer prices in China rose by 2.5%. Producer prices deflated for the 10th consecutive month at -4.4% Y/y, the median survey had seen a -4.0%. July mining prices saw the largest drop at -14.7% Y/y from a prior -16.2% and raw material prices fell by 7.6% from the prior -9.5%. Historically, Chinese producer prices are sensitive to coal prices, the spot price of coal has declined every month this year. Different from most developed markets, inflation in China is not a problem consumers have to face, the PBoC currently sees CPI rising by only 0.68% this year. A sharp drop in the value of the yuan could reverse the trend as the currency tracks losses of 5.1% to the dollar year-to-date, analysts expect the yuan to decline further into year-end. Analysts at Scotiabank said that basing prices on a year- over-year basis will only mislead economists for further deflation calls, while they noted pork prices doubling over the last six months. Also, Scotiabank flagged the sharp rise in the core price metric seen last month, noting the monthly rate was the highest July rise in more than ten years.