China's consumer inflation reached a low with uneven healing

April 12, 2023: On Tuesday, China’s consumer inflation reached the slowest since September 2021, valued by sluggish food prices, which suggests demand weakness persists amid an uneven economic rescue.

Therefore, producer deflation sped up, extending price declines for six months.

This month’s consumer price index increased 0.7% yearly, compared to the 1.0% gain seen, said the National Bureau of Statistics (NBS). The result missed the forecast 1.0% increase in a Reuters poll.

“China’s March inflation report stated that the Chinese economy is running a disinflation process, pointing to a significant room for monetary policy easing to improve demand,” said Zhou Hao, an economist at Guotai Junan International.

Food price inflation has slowed to 2.4% year-on-year from 2.6% in the previous month. On every monthly basis, food prices fell 1.4%.

That pushed the CPI to decrease 3% from a month earlier following a 0.5% decrease in February, dashing anticipations of no change.

The administration has set a target for average consumer prices in 2023 to be 3%. Prices increased 2% on year in 2022.

The producer price index (PPI) has fallen faster since June 2020, down 2.5% year-on-year compared with a 1.4% decrease in February. That was in line with a forecast that has been tipping.

The PPI remained flat for a month, in line with the latest month’s prices.

Chinese policymakers are pledging to step up support for the economy, which noted one of its bad performances in nearly half a century in the previous year because of the strict COVID-19 curbs.

Recent data has shown the economic rebound remained uneven in March, with the sector seeing a solid recovery but the sprawling manufacturing sector, which loses momentum between still-weak export orders.

The central bank slashed banks’ reserve requirement ratio in March to support an economy which faces headwinds, including low exports and the property downturn.

Beijing is required to “try every method” to stabilise its delivery to developed countries, Premier Li Qiang stated on Friday, warning that the impact of the international slowdown on the domestic economy remains a key concern.