Producer price deflation deepened further last month to a 33-month low, and consumer price inflation dropped below 1% for the first time in over a year. The key driver was lower food and fuel inflation. While we still expect some upward pressure on inflation as the labour market tightens again, we think it will remain below the government’s ceiling of “around 3.0%”, and the increase will be far smaller than what was seen in other economies after they loosened virus restrictions.
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