Chinese deflation likely deepened

Chinese CPI and PPI are expected to have deteriorated in October. Due to the decline in food prices, CPI likely decelerated further to 1.1% yoy from 1.6% yoy previously. Agriculture wholesale prices slid 7.2% mom in October after 1.6% mom increases in September, which should point to a sharp drop in food CPI from 2.9% yoy to about 1% yoy. Other categories might have remained largely stable. 

As for PPI, deflation is forecast to have deepened further to -6% yoy from -5.9% yoy in September. The input price index in the official manufacturing PMI report deteriorated from 45.8 to 44.4, an eight-month low. Therefore, the monthly fall in PPI likely quickened as well.