China's CPI inflation likely accelerated in August

Pork price growth in China increased further in August, which is expected to boost food CPI inflation. Housing CPI inflation is also expected to have risen slightly on improved demand, argues Societe Generale. In contrast, administrated fuel prices were cut in August to reflect the drop in crude prices and hence probably offset part of the strength in housing and food inflation. 

Overall, CPI inflation of the country to strengthen for the third consecutive month to 1.9% yoy in August from 1.6% yoy in July. That said, unlike previous pork cycles, the lack of demand-pull inflation this time will cause the cycle to be less inflationary and hence less of a constraint on monetary easing. The input price index in the PMI reports improved fractionally in August from July. 

"The PPI index is expected to have narrowed its contraction marginally from 0.7% mom to 0.6% mom. This means that PPI deflation probably deepened to -5.7% yoy from -5.4% yoy", says Societe Generale.