China’s factory-gate prices break a six months streak of YoY decline in January

China’s factory-gate prices have been in a downward spiral (year over year) in the past six months. While the January’s data broke the streak, analysts remain wary of the recent coronavirus outbreak in China to remove the optimism in the upcoming months.  

The health emergency has so far killed over 900 people in China. Fueling price pressures, the crisis has also seen consumer inflation at an 8-year high attributed to added restrictions on movement by the Chinese government.

Producer Price Index (PPI) Improved By 0.1% In January Versus December’s 0.5% Decline

China’s National Bureau of Statistics announced the producer price index (PPI) to have improved by 0.1% in January as compared to the last year. The reading came in line with the analysts’ estimate. In December, the index was reported to have lost 0.5%.

According to the analysts, improvement in the PPI in January is ascribed to the optimism in industrial activity towards the end of 2019. The optimism, in turn, they added, was fueled from the prospects of a phase 1 trade deal between the U.S and China that was signed in mid-January. Coronavirus and its potential impact on the global economy, however, is likely to make the gain unsustainable in the upcoming months.

In an event that business operations don’t return to normal by the end of February, Morgan Stanley anticipates the first-quarter economic growth in China to take a hit of 2 percentage points.

Consumer Price Index Printed 5.4% In January Versus 4.5% Recorded In December

The virus has so far infected more than 40,000 people in China after which the government had announced an extension in the Lunar New Year holidays to halt business operations in an attempt to contain the virus.

The consumer price index (CPI) in January, on the other hand, was revealed at 5.4% on Monday morning. The figure was capped at a much lower 4.5% in December, following which, analysts had expected an improvement to 4.9% in January.

The economic data on Monday had a strong impact on the forex market. USD/CNY was reported to have dropped from a daily high of 7.0020 this morning to a daily low of 6.9776 near which the currency pair is currently settling. The immediate resistance on the upside is currently located at 7.0065 for USD/CNY. On the downside, on the other hand, the pair is expected to meet strong support at around 6.96 level.