BEIJING- China’s consumer inflation hit an 18-month low and factory-gate price declines sped up in March as demand stayed persistently weak, shoring up the case for policymakers to take more steps to support the uneven economic recovery.
In contrast to surging prices globally, China’s retail and producer inflation has remained anemic as the consumer and industrial sectors struggle to recover from their pandemic hit.
Analysts now think consumer inflation could fall short of Beijing’s official targets this year.
The consumer price index (CPI) rose 0.7 percent year-on-year, the slowest pace since September 2021 and weaker than the 1.0 percent gain in February, the National Bureau of Statistics (NBS) said on Tuesday. The result fell short of the 1.0 percent rise tipped in a Reuters poll.
“China’s March inflation report suggests that the Chinese economy is running a disinflation process, which points to bigger room for monetary policy easing to boost demand,” said Zhou Hao, economist at Guotai Junan International.
The producer price index (PPI) fell 2.5 percent year-on-year, the fastest pace since June 2020 and compared with a 1.4 percent drop in February. The PPI has fallen for six straight months.
China’s yuan hit a more-than-one-week low against the dollar on Tuesday morning following the data, as investors stepped up bets domestic interest rates could be cut.
Shanghai’s benchmark stock index .CSI300 fell 0.25 percent, reversing a slight uptick in the opening.
Food price inflation, a key driver of CPI, slowed to 2.4 percent year-on-year from 2.6 percent in the previous month. On a month-on-month basis, food prices fell 1.4 percent.
That pushed the CPI down 0.3 percent from a month earlier after a 0.5 percent fall in February, dashing expectations of no change.
The government has set a target for average consumer prices in 2023 to be about 3 percent. Prices rose 2 percent on year in 2022.
“We think consumer price inflation will rebound in the coming months as the labor market tightens again and will peak at 2.3 percent in early 2024,” said Zichun Huang, China economist at Capital Economics. “But it will be well below the government’s ceiling of ‘around 3.0 percent’, and the increase in inflation will be far smaller than what was seen elsewhere when they opened up.” — Reuters
