China’s consumer inflation slowdown, factory-gate price deflation enhances ‘great need’ for policy support
- China’s consumer price index (CPI) rose by 0.1 per cent in April, year on year, while the producer price index (PPI) fell by 3.6 per cent last month
- CPI hit its lowest rate in over two years in April, while PPI fell at the fastest rate since May 2020
China’s consumer inflation rose at its slowest rate in over two years in April, adding to concerns over weak domestic demand and economic uncertainty and enhancing the “great need” for further policy support, analysts said.
“The market’s fears of deflation are unnecessary since CPI is a more lagging indicator,” said Larry Hu, chief China economist at Macquarie Capital.
The producer price index (PPI) – which reflects the prices that factories charge wholesalers for products – fell at the fastest pace since May 2020 and was down for a seventh consecutive month after also missing expectations and falling by 3.6 per cent in April, year on year, down from a fall of 2.5 per cent in March.
China will still face a weakening domestic demand and a sluggish labour market, and there is a great need for further policy support
But according to Hu, other indicators show China is more likely to face a period of moderate inflation, with both CPI and PPI set to be low in the second quarter before rising in the second half of the year.