The Day at a Glance | January 12 2024

*The Chinese economy closed 2023 with deflationary pressures. 

*China’s foreign trade shows signs of improvement at the end of 2023, stemming from a larger-than-expected increase in exports. 

*Federal Reserve officials say that the December Consumer Price Index (CPI) did not change the inflationary outlook. 

*The United States and Great Britain attack Yemen in retaliation for Houthi attacks on maritime transport. 

*Thousands of people will demonstrate for the elections in Taiwan, with China promising to “crush independence plots.”

Economic environment

China’s economy closed 2023 with deflationary pressures. At the end of 2023, the Consumer Price Index recorded a negative year-on-year change of -0.3%, for the third consecutive time. December´s data logged a smaller decline than the consensus forecast (-0.4%e.) as well as November´s -0.5% reading. According to the National Bureau of Statistics, pork prices were the main contributor to annual inflation, which logged a -26.1% drop. On the other hand, inflation in the services sector increased steadily, with tourism prices and hotel prices rising by 6.8% and 5.7%, respectively. On a monthly basis, consumer inflation increased by 0.1%, falling below market expectations. As for producer prices, they fell by -2.7% annually following November´s -3.0% decline. This was the fifteenth consecutive month of decreases in producer prices. China is one of the few economies in the world facing deflation in the current environment, and it´s possible that we may see a more accommodative monetary stance in the coming months.