Meanwhile, the producer price index (PPI), which reflects the prices that factories charge wholesalers for products, fell for a sixth straight month after dropping by 2.5 per cent in March, year on year, down from a fall of 1.4 per cent in February.

PPI fell at the fastest pace since June 2020 after dropping more than anticipated, with the index having been expected to fall by 2.3 per cent last month, according to Wind.

“The CPI inflation has dropped below 1 per cent. PPI has already dropped into deflation. Economic recovery is on track but not strong enough to push up prices,” said Zhang Zhiwei, president of Pinpoint Asset Management.

“This suggests that the economy is still running below its potential. There is room for fiscal and monetary policies to boost growth further. With the inflation dropping in China and the rate-hike cycle in the US coming to its end, the likelihood of [a People’s Bank of China] rate cut is rising.”

“The falling inflation readings in March suggest post-Covid recovery momentum remains weak, to the disappointment of markets,” said analysts at Nomura.

“While in-person services and mobility have clearly displayed a strong recovery, the property market’s rebound seems to have been short-lived, while exports continue to contract.

“We expect Beijing to step up policy support in coming months, as the low CPI and PPI inflation readings could provide Beijing with more room for stimulus.”

Within the CPI, food prices in China rose by 2.4 per cent from a year earlier in March, compared with 2.6 per cent growth in February, while non-food prices rose by 0.3 per cent last month, year on year, down from 0.6 per cent growth in February.

Prices for pork, a staple on Chinese dinner tables, rose by 9.6 per cent in March compared with a year earlier, while fruit prices rose by 11.5 per cent, year on year, and vegetable prices fell by 11.1 per cent.

After China’s CPI grew by 2 per cent overall last year, Beijing set a target of around 3 per cent growth for 2023.

“Production and life continued to recover with sufficient supplies in March,” said Dong Lijuan, senior NBS statistician.

Factory-gate prices continued to stabilise in month-on-month terms in March, analysts said, as prices of consumer durables dropped back further while supply-chain disruptions caused by the reopening wave of infections eased, although this was offset by higher metal prices, driven by a rebound in domestic demand.

“The expansion of the year-on-year PPI fall was mainly owing to the high comparison bases of petroleum, coal, steel and other sectors from a year earlier,” Dong added.

China’s core consumer inflation rate, excluding the volatile prices of food and energy, rose by 0.7 per cent in March compared with a year earlier, up from 0.6 per cent growth in February.

“Producer price deflation deepened further last month to a 33-month low, and consumer price inflation dropped below 1 per cent for the first time in more than a year,” said Zichun Huang, China economist at Capital Economics.

“The key drivers were a decline in food and fuel inflation. While we still expect some upward pressure on inflation as the labour market tightens again, we think it will remain below the government’s ceiling of around 3 per cent, and the increase will be far smaller than what was seen in other economies after they loosened virus restrictions.

“We think consumer price inflation will rebound in the coming months, as the labour market tightens again, and will peak at 2.3 per cent in early 2024.”

Additional reporting by Frank Tang