China's November CPI Indicates Deflation Remains Unaffected by Policy Stimulus

By TrendForce

2024-12-09

China CPI increased by 0.2% year-on-year in November, a decrease of 0.1 percentage points from the previous period, according to data released by the National Bureau of Statistics on December 9. On a month-on-month basis, CPI declined by 0.3%, falling 0.3 percentage points compared to the prior month, indicating that despite dual monetary and fiscal stimulus measures, deflationary pressures in China have not significantly eased.

Breaking down the components, food prices, a key driver of CPI growth, saw a further decline, with the year-on-year increase narrowing by 2 percentage points to 0.9%. Non-food prices posted a year-on-year change of 0.0%, up 0.3 percentage points, reflecting a slower decline in crude oil prices. Meanwhile, service prices maintained a year-on-year increase of 0.4%. Core CPI, which excludes food and energy, rose by 0.3% year-on-year, a marginal increase of 0.1 percentage points from the prior period.

Key Focus This Week: U.S. CPI & Euro Area and Australia Monetary Policy

Last week, U.S. stock sectors experienced fluctuations, but the strong performance of large-cap technology stocks propelled the S&P 500 Index to a new record high, closing at 6,090.27 points. In the bond market, the 10-year U.S. Treasury yield continued its weakening trend, retreating further to around 4.15%, while the U.S. Dollar Index fluctuated and ultimately settled near 106.   Key Economic Data Review for Last Week U.S. ISM Manufacturing PMI: The U.S. ISM Manufacturing PMI for November was 48.4 (previous: 46.5). This increase was primarily driven by improvements in new orders (50.8, previous: 47.1), production (46.8, previous: 46.2), and inventories (48.1, previous: 42.6), reflecting a partial recovery in demand following the conclusion of the presidential election. However, the customer inventories index edged up slightly to 48.1 (previous: 46.8), indicating that end-user demand remains subdued. Read more at Datatrack     U.S. ISM Services PMI: The U.S. ISM Services PMI fell to 52.1 in November (previous: 56.0), marking its lowest level in three months. The decline was mainly attributable to drops in the business activity index (53.7, previous: 57.2) and the new orders index (53.7, previous: 57.4), influenced by uncertainty surrounding future tariff policies and cabinet changes under former President Trump. Additionally, the employment index also declined to 51.3 (previous: 53.0), aligning with signs of a slowing labor market. Read more at Datatrack     U.S. November Employment Situation: November's employment data presented mixed results. Nonfarm payrolls, based on the establishment survey, rebounded to 227,000 (previous: 12,000), driven by notable job gains in education and healthcare (79,000) and government employment (33,000). Leisure and hospitality (53,000) and manufacturing (22,000) also recovered significantly after disruptions from hurricanes and strikes. However, the unemployment rate, based on the household survey, edged up to 4.2% (previous: 4.1%), while the labor force participation rate fell to 62.6% (previous: 62.7%), reflecting an increase in the unemployed population. Although JOLTs data suggests the labor market remains in a state of low hiring and low layoffs, vulnerabilities are becoming increasingly apparent, warranting close monitoring. Read more at Datatrack     Key Economic Data for This Week Australia Interest Rate Decision (12/10): Despite a significant decline in inflation and slowing economic growth, Australia's labor market remains robust, and inflation has not yet returned to the Reserve Bank of Australia's target range of 2-3%. Consequently, markets expect the RBA to maintain interest rates unchanged, citing potential upside inflation risks, with the first rate cut anticipated in Q1-Q2 of 2025. Read more at Datatrack U.S. CPI (12/11): The U.S. CPI for October rose due to low base effects in Q4 and seasonal demand from holiday shopping. Markets expect this trend to continue in November. According to data from the Cleveland Federal Reserve, November CPI is projected at 2.70% (previous: 2.58%), while core CPI is forecast to remain at 3.30% (previous: 3.30%). Read more at Datatrack Eurozone Interest Rate Decision (12/12): Given the Eurozone's persistently weak economic performance, with both manufacturing and services sectors in contraction, markets expect the European Central Bank to implement another 25-basis-point rate cut at this meeting and potentially lower rates by a total of 100 basis points in 2025. Read more at Datatrack

2024-12-11

Middle East Geopolitics & OPEC's Production Delay Boost Oil Prices: What Lies Ahead for Long-Term Trends?

Global crude oil prices have been volatile since the third quarter of this year. Recently, uncertainties surrounding Middle Eastern geopolitics, spurred by the collapse of the Syrian government, alongside OPEC+'s decision to postpone its January 2025 production increase to April, have collectively driven WTI and Brent crude oil prices up by approximately 2.3% within a few days to $68.6 and $72.4 per barrel, respectively. However, these factors appear to offer only short-term support for oil prices, with their long-term trajectory remaining unclear for the following reasons:   Weak Demand in China Despite the Chinese government launching a series of easing policies in September, recent inflation data indicates that domestic consumer demand remains weak. Moreover, a recent report by the EIA highlights that the increasing adoption of electric vehicles and liquefied natural gas trucks in China is expected to further reduce the country's demand for crude oil.   Trump’s Energy Policies With Donald Trump re-elected as U.S. President and appointing Lee Zeldin as head of the Environmental Protection Agency, U.S. energy policy is expected to shift further toward traditional energy sources. Currently, U.S. crude oil production is at a historical high, and the EIA's December report projects that even if refinery output decreases in the future, crude oil production is likely to continue growing.   OPEC Resuming Production Increases Although OPEC announced on December 5 a delay in its planned January 2025 production increase to April, the EIA estimates that while this reduction could lower global crude oil inventories by approximately 700,000 barrels per day in the first quarter of 2025, subsequent production increases by OPEC and continued production growth by non-OPEC countries may lead to a daily global inventory increase of about 100,000 barrels.   While crude oil prices have seen short-term support from Middle Eastern political instability and delayed production plans, longer-term dynamics remain uncertain. Factors such as weak demand in China, anticipated production increases by OPEC, and ongoing supply growth from non-OPEC countries are likely to maintain pressure on oil prices. The EIA projects that Brent crude oil prices will gradually decline from $74 per barrel in the first quarter of 2025 to $72 per barrel by the fourth quarter. Read more at Datatrack

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