China: Inflation Up. Down. Japan: Trade Surplus Back In The Black

China's inflation data for March, like the performance of manufacturing surveys the week before, have left us with mixed impressions about the price pressures in the world's second largest economy.

The official survey of big manufacturing firms for March showed a sharp improvement deeper into an expansion phase, while the private survey from HSBC/Markit showed a fall deeper into the contraction phase.

The end result left us no wiser about the health of the economy, which is Australia's most important trading partner.

The March inflation data for March showed a similar mix: a small rise in the monthly and yearly rate for consumer prices and a fall and a small rise in the yearly and monthly on month measures of producer prices.

The news saw shares in Asia fall yesterday, helped by the continuing rise in the value of the yen that hit a month high against the greenback.

Japanese shares fell 1.5%, despite a jump in the current account surplus in February (see below).

South Korea and Shanghai were also weaker.

Markets in Hong Kong, Australia, New Zealand, Thailand and the Philippines were closed for public holidays, as was London and some European bourses.

The consumer price index (CPI) rose by an annual 3.6% rate last month, up from the 3.2% rate in February.

That's still well under the 6.5% rate last July.

The country's CPI climbed 3.8% in the first quarter compared with the previous year, just inside the official target of 4% annual for 2012.

On a monthly basis, CPI rose 0.2% in March from February, which is hardly a return to 'inflation pressures loom' headlines.

Food prices, which account for nearly one-third of the weighting in the calculation of China's CPI, increased 7.5% last month from one year earlier, up from the 6.2% annual rate in February.

But the country's Producer Price Index (PPI), the main measurement of wholesale inflation across the economy, fell 0.3% in March from a year earlier, after being steady at an annual 1.7% rate in February.

That is the first negative year on year PPI measurement since December.

On a month-on-month basis, the country's March PPI rose 0.3% from February.

In the first quarter of this year, the PPI rose 0.1% year-on-year, which again isn't startling.

Meanwhile estimates of first quarter GDP growth leaked to official media in the past couple of days suggest the economy slowed again in the March quarter.

According to the latest report, China's economy is set to grow 8.4% in the first quarter from a year earlier.

That estimate came from a senior official with the nation's economic planning agency, who said the figures were preliminary and based on research.

That's up from another estimate of 8.2%.

China releases the GDP figures this Friday.

Credit Agricole CIB said in a note last week that an 8.4% annual growth rate would imply quarter-on-quarter growth of 1.6%, or around 6.5% annual.

(China's growth rate is on a year to basis, meaning the rate for the March quarter will be for the 12 months ended March 31.)

Credit Agricole said a 6.5% annual rate would mean the slowest rate of economic growth for three years.

Other economists suggest that once the GDP, trade (today), industrial production, retail sales, car sales, urban investment and money supply figures are released over the next three days, another interest rate cut would be announced by the government.

Japan's current account swung back into surplus in February after suffering January's record deficit.

Japan's Finance Ministry said the surplus (which is the broadest measure of what Japan earns through international trade and investment) rose to 1.178 trillion yen (around $US14.8 billion) in February before seasonal adjustment, 30.7% down from the same month in 2011.

It was a massive 1.6 trillion yen turnaround on January's deficit of 437.3 billion yen thanks to weak exports, especially to China (caused by the Lunar New Year Holiday in China) and surging energy imports.

Japan's merchandise trade balance was a 102.1 billion yen ($US1.3 billion) surplus in February after four months of deficit.

That was down 86% from a year earlier.

Exports fell 2% thanks to the slowdown in the global economy triggered by Europe's credit worries, but rose sharply to the US for the first time in several months.

Imports, on the other hand, jumped 11% because of higher crude oil prices and rising imports of liquefied natural gas to fuel thermal power plants after the Fukushima nuclear accident last year.