China: Oil to drag inflation down – ANZ

Core CPI usually drops after the Lunar New Year month, but this year’s fall is much larger than the 2010−19 average, economists at ANZ Research inform.

Key quotes

“China’s core CPI hit a 10-year low in February of 1.0% y/y, suggesting the COVID-19 epidemic has affected demand more than supply.”

“Falling commodity prices and high domestic inventories in upstream sectors have driven PPI deflation.”

“We estimate a 10% fall in the crude oil price will lead China’s CPI and PPI down by 0.3% and 0.8%, respectively. Given the turbulence in the crude market, we expect China’s inflation will drop further in coming months.”