China Economic Slowdown Concerns Growing – Inflation Data Focus

Chinese CPI for June had risen 2.2% relative to June last year. This shows a decline when  compared to the 3% annual increase in May and is the lowest experienced since 2010.

National Bureau of Statistics data likewise revealed that the PPI reading – which focuses on  wholesale prices — had contracted by 2.1% for the month of June last year.

These figures are in-line with analysts expectations when referencing a Dow Jones Newswires’ poll of economists.   Today’s data will give Premier Wen Jiabao an opportunity to further soften Chinese economic policies following a second interest rate cut for the world’s second biggest economy.  The Chinese premier recently pledged to hold consumer price increases around 4% percent.

Soft inflation data could be indicating that the economy is experiencing weaker growth.

All eyes will now be on Q2 GDP statistics this Friday from the national bureau of statistics of China.  Industrial output data (Industrial Production y/y) may show that demand for factory output from China, in particular exports, could be decreasing.

By the end of this week the market may have a better idea around whether additional PBoC easing is required in the near to mid term.