China Reflation Momentum Strengthens

China's April inflation data showed a significant uptick, with PPI hitting a 45-month high of 2.8% and CPI rising to 1.2%, primarily driven by energy costs. This reflationary trend, alongside strong exports, likely keeps the PBOC from cutting rates until the second half of 2026.

Key Takeaways

• 1.China's CPI and PPI both beat April forecasts, with PPI reaching a 45-month high of 2.8% YoY driven by rising energy costs.
• 2.Energy prices, exacerbated by the Iran war, are a primary driver of reflation, particularly in transportation and raw materials.
• 3.Food inflation remains a drag at -1.6% YoY, largely due to a 15.2% drop in pork prices caused by oversupply from soybean-linked pig feed deals.

Table of Contents

• CPI inflation rebounds in April despite drag from food prices
• Food inflation still dragging inflation amid pork price weakness
• PPI inflation hits 45-month high
• Reflation and resilience of exports further reduces rate cut urgency
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