BEIJING (Reuters) – China’s consumer prices rose at their weakest pace in more than two years in April, while factory deflation deepened, data showed on Thursday. .
Weak consumer price gains strengthen signals from this week’s trade data that suggest domestic demand remains lackluster, while a deflationary impulse in producer prices underscores the strain on factories. . Damage caused by COVID.
April’s consumer price index (CPI) rose 0.1% year-on-year to its lowest level since February 2021, down from the 0.7% annualized rise seen in March, the National Bureau of Statistics (NBS) said. ) said. The result missed the median estimate of a 0.4% gain in a Reuters poll.
Last month’s producer deflation also deepened and, together with CPI data, highlights that the broader economy is struggling to recover after COVID restrictions were lifted in December.
The Producer Price Index (PPI) fell at its fastest clip since May 2020, falling for the seventh month in a row, down 3.6% year-on-year after falling 2.5% the previous month. This compared with the expected decline of 3.2%.
China’s economy grew faster than expected in the first quarter thanks to the lifting of COVID-control measures, but the recovery was uneven. Recent data show that factory activity has contracted, but there are concerns about persistent weakness in the real estate market.
Analysts say the reopening probably provided some upward momentum to service inflation, but that was largely offset by slower growth in food and energy prices.
The latest data could put pressure on the People’s Bank of China (PBOC) to cut interest rates or release more liquidity to the financial system. In March, the lenders’ reserve requirement ratio (RRR) was lowered for the first time this year.
China has already instructed banks to lower the interest rate caps they pay on certain types of deposits.
Ting Lu warned of a weakening post-coronavirus economic recovery, People’s Bank of China guidance on lowering deposit rates, ongoing disinflation, lower market rates and a possible Fed moratorium. We continue to believe that the PBOC’s policy lending rate cut is becoming more likely, given the indications.” Nomura’s chief China economist said in a research note.
PBOC tested
Overall inflationary pressures remained low, with core consumer inflation, which excludes volatile food and energy prices, rising 0.7%, unchanged from the previous month.
The Bureau of Statistics attributed the decline in consumer inflation to the base effect. Vegetable prices expanded their losses to 13.5%, while pork, the main driver of CPI, slowed to 4.0% from its 9.6% in March.
Overall, analysts are divided on whether central banks will continue to ease policy as record credit growth is likely to limit the extent of financial support they can provide.
“China is still in a phase of disinflation, not deflation. A post-reopening recovery, boosted by the Labor Day holiday, could push May’s CPI numbers even higher, leading to massive near-term inflation. “It means there is less urgency for monetary easing.” Jones Lang LaSalle chief his economist Bruce Spann said:
At last month’s Politburo meeting, leaders pledged to keep support for the economy, with a focus on boosting domestic demand.
“Ensuring income growth and improving consumer confidence remain key policy priorities to deliver a more sustainable consumption recovery,” Pang said.
Reported by Liangping Gao and Ryan Woo.Edited by Sri Navaratnam
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