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China April inflation data within expectations

  • Published 11 May 2010

Chinese economic data released on Tuesday showed inflation rising in April in line with forecasts and loan growth somewhat exceeding expectations. We think that, taken alongside cooling trends evident in industrial output and real estate transactions, pressure on Beijing to raise deposit rates are rising while pressures for a hike in lending rates are either neutral or abating.

The Consumer Price Index (CPI) rose to 2.8% in April year on year, up from March's 2.4% rise and in line with our estimate (CC Update Alert May 7). The Producer Price Index, a measure of ex-factory prices, rose 6.8% in April year on year, up from 5.9% year on year in March. The increase in CPI means that April was the third consecutive month that consumer product inflation outstripped the benchmark bank deposit rate of 2.25%, suggesting rising pressures for a deposit rate hike.

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