According to China’s National Bureau of Statistics (NBS), headline inflation rose for the second consecutive month to 2.3% year to year in November the highest since August 2020.
The increase was largely due to increased demand and supply chain constraints amidst the intermittent COVID-19 outbreaks during the period. Accordingly, food prices (+1.6%) rose for the first time in six months, given the slower fall in pork prices.
Meanwhile, the non-food basket rose slightly by one basis point to 2.5% year to year in October with the most significant price pressures witnessed in the transportation and communication and recreation sub-baskets. On a month-on-month basis, consumer prices rose by 0.4% in November (October: +0.7% m/m).
Financial Expects say the inflationary pressures are like to persist over the short-to-medium term in line with the troika impact of persistent supply chain disruptions, higher energy prices and base-induced mild decline in pork prices.
Domestic price pressures in the United States (US) gathered momentum as robust consumer demand continues to collude with pandemic-induced supply constraints. According to the Bureau of Labor Statistics (BLS), headline inflation rose to 6.8% in November, the ninth consecutive month above the Fed’s 2.0% target and the highest since June 1982 (+7.1% y/y).
The upward pressure on domestic prices reflects the impact of ongoing global energy crunch, pent-up demand following continued unwinding of lockdown measures, and persistent supply chain disruptions.
As a result, pressures were most significant in the prices of gasoline (+58.1%), food (+6.1%), shelter (+3.8%) and new vehicles (+11.1%).
Financial Experts at Cordross Capital say the the inflation reading suggests that some previously determined transitory price pressures may be here to stay for some time. Consequently, the Fed could be compelled to speed up its asset purchases tapering and potentially increase the pace of interest rate hike in 2022.
Global markets
Global stocks were broadly positive following optimism on vaccines for the Omicron variant. Furthermore, the US inflation data released on Friday eased concerns about the Federal Reserve’s aggressive tightening of its monetary policy.
In the US, the DJIA (+3.4%) and S&P 500 (+2.8%) halted two weeks of bearish trading as fears over the latest coronavirus variant abated.
European equities (STOXX 600: +2.7%, FTSE 100: +2.6%) were set for a weekly gain, boosted by a strong recovery in mining stocks.
In Asia, the Nikkei 225: (+1.5%) closed the week positively on receding concerns about the Omicron variant. Similarly, the Chinese market (SSE: +1.6%) rallied as Alibaba Group Holding Ltd. led a rebound in Chinese tech firms earlier in the week. Likewise, the Emerging (MSCI EM: +1.9%) and Frontier (MSCI FM: +0.7%) market stocks mirrored the bullish trend across global equities, consequent upon gains in China (+1.6%) and Kuwait (+1.3%), respectively.
