China’s producer price index likely to have accelerated sharply in December

China’s producer price index is likely to have accelerated sharply in December. According to a Societe Generale research report, PPI is expected to have increased further to more than 5 percent year-on-year in December from 3.3 percent in November amidst strong commodity prices and as a positive base effect.

Inflationary pressure has been very evident in the PMI prints. The input price index in the official reports strengthened further in December, rising to 69.6 from 68.3, the highest level in 70 months. This appears to indicate towards another sequential rise of more than 1 percent for the PPI. CPI inflation is expected to weaken from 2.3 percent year-on-year to 2.1 percent year-on-year.

The projected fall is mainly because of food prices staying stable in the month, translating into a lower year-on-year rate for food inflation in the midst of a negative base effect, stated Societe Generale. But, non-food price inflation is likely to have accelerated again. Housing inflation probably rose to a 30-month high of 2.1 percent year-on-year from 2 percent, whereas other non-food inflation is expected to have accelerated to 1.8 percent year-on-year due to rapidly rising energy prices, added Societe Generale.