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Bottom line: despite the recent easing in both headline and core pressures, inflationary pressures remain well outside pre-COVID ranges in the US, the Euro area and the UK.
The Japan Exception
Underlying pressures in Japan stand out for being even stronger. The Japan NIPI is still close to all-time high levels: read more.
Inflation NewsBot Shows China Auto Sector Meltdown
The Inflation NewsBot reports the news relevant to near-term inflation forecasting, which are also behind the NIPI diffusion indices. Among all ongoing stories, one caught our eyes: the automakers price war in China.
In China, new car sales have significantly dropped at the start of the year, relative to 2022 levels. Subsequently, all brands have been reporting massive (double digits) rebates since early March - including European and US ones in the last few days. You can read about it in these Chinese news articles here and here, translated here and here.
There is nothing remotely close happening in North America or Europe, even though electric car prices are under some downside pressure.
This goes to show that the retail inventory buildup must be massive in China.
It also proves that European and US carmakers can lower list prices when needed. Not just Tesla. If they have not done so on their domestic markets, it means that demand has not eased enough there yet.
Citi Inflation Conference Presentation
It was a privilege to talk at Citi's Global Inflation Conference in London on 22nd Feb. For anybody interested, here are our slides and references.
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