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The calm before the storm for China inflation

• atimes.com by Steve Wang

hina economists have been nodding off at the wheel on inflation figure predictions, underestimating how quickly prices are rising across factory gates and potentially overlooking the trickle down effect on consumers.

The biggest surprise in this week's inflation data out of China was clearly the unexpectedly large acceleration of the Producer Price Index to 5.5% in the final month of 2016. Economists were looking for a 4.5% rise. A month earlier, the median estimate for November PPI was 2.2%, only to see the actual growth to be a whopping 3.3% uptick.

And the 2.1% rise in the Consumer Price Index came in below expectations of 2.3%, which appears to reinforce the view that consumers are too removed from sharing the higher input costs at the factory level.

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