BEIJING - China’s consumer inflation slowed to the weakest pace in two years in April while producer prices fell deeper into deflation, reflecting muted domestic demand and softer commodity costs.
The consumer price index (CPI) inched up 0.1 per cent last month from a year earlier, the National Bureau of Statistics said on Thursday, compared with a 0.7 per cent increase in March. The median estimate in a Bloomberg survey of economists was for a 0.3 per cent uptick. That was the weakest since February 2021, when consumer prices fell into deflation.
Core CPI, which excludes volatile food and energy costs, increased 0.7 per cent, unchanged from the previous month.
Producer prices fell 3.6 per cent in April after declining 2.5 per cent in the previous month. That was more than economists’ expectations for a 3.3 per cent drop.
“There is still a big gap between demand and its pre-pandemic trend,” said Xing Zhaopeng, senior China strategist at Australia & New Zealand Banking Group, which he estimated may take three-to-five years to mitigate. “We do not think domestic demand can improve significantly in the near-term.”
The April figures were affected by the high base of comparison from last year, NBS analyst Dong Lijuan said in a statement. Consumer prices had increased rapidly then as Covid lockdowns of major cities - including Shanghai - battered supply chains and pushed people to stockpile food.
Lower food and energy costs pushed inflation lower. Food prices rose 0.4 per cent in April from a year earlier, compared to a 2.4 per cent increase in March, with pressures on pork prices waning.
Producer-price deflation is also being driven by falling costs for commodities like iron ore and crude oil.
The inflation data may help to inform the central bank’s next steps amid signs of a waning economic recovery. While growth accelerated to a one-year high in the first quarter, recent data have flashed some warning signs: manufacturing activity unexpectedly contracted in April, imports plunged and export growth weakened.
Policymakers have signaled they want to maintain a pro-growth stance in the face of subdued domestic demand, high youth unemployment and weak property investment. The People’s Bank of China may have scope to ease monetary policy further if necessary, since more banks have cut deposit rates recently and US Federal Reserve has signaled a potential pause in rate hikes.
Given energy price drops and stable core inflation, ANZ’s Mr Xing said it was “unlikely” that monetary policy in China would respond to the data. He said he sees the central bank holding rates this year. BLOOMBERG
