New Sign of Slowdown in China’s Inflation Data



On November 9, the National Bureau of Statistics of China released price inflation data for October 2015, which came in lower than expected and lower than September’s data. This resulted in a fall in the prices of copper and other base metals on November 10.

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Chinese slowdown is weighing on copper

China is the world’s biggest consumer of copper, accounting for 45% of global copper consumption. Any disappointing macroeconomic data related to China negatively affect the prices of copper and other base metals. LME (London Metal Exchange) three-month copper prices have fallen 22% since the beginning of the year because of the slowdown in the Chinese economy.

China’s inflation shows further economic slowdown

China’s consumer price index (CPI) is a key measure of purchasing trends and inflation in the country. An increase in the CPI should be positive for the Chinese economy and vice versa. China’s CPI rose 1.3% in October, although it missed expectations of 1.5%. The increase was also below September’s CPI increase of 1.6%. This raises concerns about declining growth in the world’s second largest economy. On November 10, LME three-month copper prices fell by 0.8% on weak Chinese CPI data.

Strong dollar is also weighing on copper

In addition to the Chinese CPI data, the movement in the dollar index led to a fall in the price of base metals. Recently the dollar has been gaining strength because of strong US economic data. On November 10, the dollar hit a seven-month peak and kept the pressure on base metal prices. This also had an impact on major mining companies such as Freeport-McMoRan (FCX), Glencore (GLEN), and Alcoa (AA). Major base metal ETFs such as the SPDR S&P Metals & Mining ETF (XME) and the PowerShares DB Base Metals Fund (DBB) also fell on the day because of the weak China CPI.


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