THE TAKEWAY: China Consumer Price Index +2.2% in June Y/Y versus +3.0% in prior year > Prices have continued to ease since July 2011 hinting toward potential economic slowdown > Australian dollar unmoved
China Consumer Price Index fell to +2.2% in June, year-over-year, from +3.0% a year before. Consumer prices have been rising at decreasing rates since July 2011 where price acceleration peaked at 6.34% from the prior year. The downward trend in CPI may indicate potential future economic contraction and is sometimes used as a guide to help confirm slowing business conditions. A slowing economy is often correlated with lower prices.
Moreover, the soft CPI figures were released after the Chinese central bank cut benchmark lending and deposit rates last week for the first time since 2008. Such policy measures should help to thwart contractionary forces and simultaneously support growth.
The Australian dollar was little changed on the release and appears to be in consolidation after experiencing losses during Friday’s trading session.
AUD/USD, 15 Minute Chart
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