For the 47th month in a row, China’s Producer Prices have fallen year-over-year – a record deflationary streak. CPI rose 2.3% YoY – the fastest pace since May 2014 (against expectations of a 1.8% rise in consumer prices, and at the upper end of the +1.5% to +2.4% range). PPI printed as expected with a  4.9% YoY plunge in producer prices (-4.5% to -5.5% range). However, what is most disturbing – from both a social unrest and economic-stimulus-hope basis, is that Food prices exploded 7.3% YoY – the most in 4 years.

CPI accelerating and PPI slumping..

“The uptick in consumer prices is certainly striking,” Bloomberg Intelligence economists Tom Orlik and Fielding Chen wrote in a report. “But with virtually the entirety of the increase coming from food prices, it’s not an increase that’s likely to be sustained for long. Food prices are subject to supply shocks and seasonal blips.”

But, it looks like Food-flation is here to stay… China Pork prices were up 18.8% YoY in January (we can’t wait to see the Feb data now)

As Bloomberg noted recently,

“It’s really a problem of lack of domestic growth and domestic demand,” John Zhu, an economist at HSBC Holdings Plc in Hong Kong, said in a Bloomberg Television interview. “The longer you get negative PPI, the more the risk that inflation expectations get dragged lower.”

Factory-gate deflation will probably moderate to about 5 percent in the first quarter, according to Niu Li, an economist at the State Information Center, a research arm of the National Development and Reform Commission, the nation’s chief planning agency.

“The producer-price index is still much lower than what we thought, indicating severe difficulties in the industrial sector,” Niu said in an interview. “The PBOC is unlikely to impose any major change in its monetary policies because of the reading.”