Inflation Is in the Spotlight with China CPI, BOJ Rate Decision

Who would have thought that an interest rate hike in New Zealand would spark a sell-off in global markets?! Inflation is the buzzword around the world this week.

And over in Asia, an inflation check in 36 cities across China shows a substantial surge in food prices. May statistics from the Ministry of Commerce show the price of wholesale pork climbed 43% from a year earlier; add to that, a 31% increase in egg prices, a 40% hike in cooking oil and don’t forget rice … up 6%. And rice makes up a hefty portion of the Chinese diet. Mix it all in a bowl and you will have a rather costly serving of inflation stew.

Economic Data This Week

Food accounts for a third of the Chinese consumer price inflation basket due out on Tuesday. More importantly, analysts are calling it the single most vital piece of data, pivotal to whether or not the Peoples Bank of China will raise rates at their next meeting.

Business Calendar June 11 - 15

Monday June 11 China May PPI
Tuesday June 12 China May CPI
Wednesday June 13 China May Retail Sales; Japan April Current Account; Japan Revised April Industrial Output; U.S. Beige Book; U.S. May Retail Sales
Thursday June 14 China May Industrial Output
Friday June 15 Bank of Japan Economic Report; Bank of Japan Rate Decision; U.S. May CPI; U.S. Q1 Current Account

On Wednesday, investors won’t have time to catch their breathe in the Chinese CPI aftermath as Japan’s April Trade data kicks off early morning activity followed by China’s May retail sales data is released.

Still on Wednesday, but during U.S. hours, market participants will look for continued strength in the North American real estate sector when the Fed’s Beige Book data is released. Previous figures showed a strong increase in commercial property sales, while year-to-date home sales fell 6% from the previous year.

On Thursday, it’s back to China as investors look to see if industrial output figures will rally for the third month in a row above the 17% mark, adding to pressure on the government to tightening interest rates to cool investment in the world’s fastest-growing major economy. April’s production figures came in at 17.4%.

Investors will need to stay on their toes during the data-packed session Friday. Japanese exporters suffering from the yen’s recent strength will need to listen closely to see if the Bank of Japan drops any hints about a further interest rate hike. The current rate stands at 0.5%. And later in the session, the U.S.’s May consumer price index is due out. Joseph Brusuelas, Chief US Economist at IDEAglobal expects to see a 2.3% year on year rise in core inflation and should provide confirmation of easing inflation. Brusuelas expects to see headline inflation remain elevated due to higher gas and food prices, the core should lend support to the Fed's claim that inflation will ease over time.

And that’s the week ahead for Asia. We'll leave you with some special days of note …

This Week In History

1770 June 11 Captain James Cook Runs Aground On The Great Barrier Reef
1898 June 12 The Philippines Establishes Independence From Spain
2000 June 13 South Korean President Kim Dae Jung Meets North Korean Leader Kim Jong-IL For The First Ever Inter-Korea Summit
1967 June 14 The Peoples' Republic Of China Tests Its First Hydrogen Bomb
1752 June 15 Benjamin Franklin Proves That Lightening Is Electricity