Weak consumer confidence in China may signal deflationary pressure

China's February inflation data, due on 10 March, is likely to show continued deflationary pressures in the economy. According to Standard Chartered research:

• We expect CPI inflation to have inched up to 0.9% y/y from 0.8% in January as fresh fruit and vegetable prices rose during the Lunar New Year holidays. However, pork prices were subdued and weak economic growth likely slowed consumption. 
• Our consumer confidence index, which usually leads CPI inflation by around three months, continued to deteriorate in January February, suggesting further downward price pressure. 
• We expect PPI inflation to have stayed flat at -4.3% y/y in February given the stabilisation of global raw-material prices. Rising deflationary pressures may create room for further policy easing.