China's inflation likely to trend higher in H2

China's CPI inflation to rise above 2.0% by year-end. CPI inflation is set to reach 2.2% y/y in December, and is likely to average around 1.6% in 2015, forecasts Standard Chartered.

This assumes that, 

• (1) food inflation returns to normal
  
  
• (2) energy prices increase moderately in the months ahead
  
  
• (3) China continues with price reforms in natural gas and water

According to Standard Chartered's estimation, inflation may stay low in June, but it is expected to start edging up in July and PPI deflation is likely to ease in H2. 

The m/m decline in producer prices appears to have moderated, and some items - including nonferrous metal, chemical products and rubber - showed significant m/m price increases in May, added Standard Chartered. Assuming producer prices remain flat from now until the year-end, PPI deflation is set to moderate to about 2% y/y in December from 4.6% in May, mostly due to the base effect