China inflation risk ‘modest’ as consumer costs rise amid lockdown pressure, factory-gate prices ease

China’s consumer prices rose slightly last month amid logistic disruptions caused by strict coronavirus controls, while factory-gate inflation eased to its lowest level in a year, leaving room for policy support to stem economic risks.

The producer price index (PPI), which reflects the prices that factories charge wholesalers for products, also beat expectations but continued to moderate last month and stood at 8 per cent in April from a year earlier.

“The data is largely in line with expectations,” said Larry Hu, chief China economist at Macquarie Group.

“Looking ahead, we expect CPI inflation to trend up and PPI inflation to trend down. Overall, the risk of inflation remains modest in China. Policymakers will step up policy support after the current Covid wave is brought under control.”

The CPI increase was driven by China’s food prices rising by 1.9 per cent last month from a year earlier, up from a fall of 1.5 per cent in March.