There was some good and some bad news in yesterday’s Chinese March inflation (and deflation in the case of PPI) data.

The good news, for those who believe that rising inflation is a positive economic outcome, was that Producer Prices declined “only” 4.3% Y/Y, or less than the -4.6% expected, and better than the -4.9% drop last month. On a sequential basis, PPI rose by 0.5% on the back of various commodity input prices posting a modest increase in the past month on the back of China’s epic January loan injection.

However, putting that rebound in context, on an annual basis, Chinese gate inflation, or rather deflation, has now been negative for 49 consecutive months.

The not so good news, was in the CPI print, which rose 2.3% Y/Y, missing expectations, and in line with last month’s identical increase. This tied headline inflation at a 22 month high, even as non-food inflation rose a paltry 1% in March.

On a sequential basis, however, CPI dropped by 0.4% M/M, driven by a 0.1% decline in non-food inflation coupled with a much needed 1.8% drop in food inflation. As a reminder, in recent months Chinese food inflation has exploded driven by a 60% jump in pork prices which had risen to the point where the population was starting to grumble about the surging prices of this most popular protein in the mainland.

Still, on a Y/Y basis, food inflation rose once more, increasing 7.6% Y/Y and remains the only stable component of inflation, hardly the “diet” for a stable, growing economy, in which consumers are forced to spend their discretionary income on staples instead of pushing up broader, core prices.

The best news, however, since China’s inflation appears to have once again peaked, is that this means the media will be flooded with expectations of more stimulus from the PBOC in the form of either RRR or interest rate cuts, which in turn pushed the Shanghai Composite more than 1% higher and back over 3000 (which mayor may not be the result of more direct PBOC buying: as a reminder, as of last week we now know the Chinese central bank is directly buying bank stocks, breaking a core central banking taboo).