China's CPI inflation to have inched up to 1.6% y/y from 1.4% in March on a lower base last year. Food prices likely dropped 0.5% m/m in April based on interim data from the Ministry of Commerce and National Bureau of Statistics (vegetable and fruit prices continued to drop, benefiting from warm weather), but y/y food inflation may have risen to 3.2% y/y from 2.3% in March, due to a significant positive base effect.
Non-food prices may have increased 0.2% m/m, reflecting seasonal patterns as well as gasoline/diesel price hikes during the month, but y/y non-food inflation likely remained unchanged at 0.9% due to a negative base effect. Overall price level may have fallen 0.2% m/m, and y/y inflation likely rose slightly to 1.6%.
Producer prices to have fallen by 4.5% y/y. Based on interim data from the Ministry of Commerce, producer prices of energy, rubber and ferrous metal fell m/m. Overall PPI may have declined 0.2ppt m/m, but y/y deflation likely eased slightly from 4.6% in March.
Standard Chartered says, "we do not expect a turnaround in PPI deflation in the coming months. We believe subdued inflation will allow room for further monetary policy easing in Q2- and Q3-2015".
