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China's CPI increased by 1.5%, PPI continues to fall

Wednesday, Dec 09 2015
China's consumer inflation picked up slightly in November but remained well under the government's 2015 price target of 3% raising concerns that the world's no. 2 economy could be sucked into a Japan-style deflationary trap. The data has increased calls from some economists for more stimulus and interest rate cuts to spur growth and prices, even though the November consumer price index (CPI) surprised on the upside, rising 1.5% on-year from 1.3% in October. Economists had expected a 1.4% rise.
 
"With corporate confidence already at a six year low, persistent deflation might also put the economy at risk of a downward spiral," said HSBC economists in a note to clients. "More aggressive policy easing still holds the key to stabilize growth in the coming months."
 
Wednesday's release from the National Bureau of Statistics (NBS) also showed factories were plagued by producer price deflation, with the producer price index (PPI) down 5.9% in November from year earlier, in line with expectations and flat from October's drop. It marked the 45th straight month of declines in the index.
 
Aussie is currently being traded around 0.7220 area. Pair is likely to find support around 0.7180 handle and resistance above 0.7280 level. There will be no major data releases in the rest of the session.
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