China consumer inflation falls below 1% in March

China consumer inflation falls below 1% in March
Commuters wearing face masks walk across an intersection in the central business distric in Beijing, Monday, Mar 6, 2023. (AP Photo/Mark Schiefelbein)

BEIJING: China’s consumer price inflation fell below 1 per cent in March, official figures showed Tuesday (Apr 11), a sign of weak demand as the world’s second-largest economy tries to recover from its pandemic-driven slump.

The March consumer price index (CPI) – the main gauge of inflation – came in at 0.7 per cent, down from the 1 per cent seen a month earlier, according to the country’s National Bureau of Statistics (NBS).

Beijing is targeting an average inflation rate of 3 per cent for 2023, which is still far below the current rates of many developed economies.

Analysts had expected a faster pace in March, with economic activity picking up again after the abandonment of zero-COVID restrictions at the end of 2022.

The producer price index (PPI), which measures the cost of goods leaving factories, shrank for the sixth consecutive month, with prices falling 2.5 per cent – indicating lower margins for businesses.

“Economic recovery is on track but not strong enough to push up prices,” Zhiwei Zhang of Pinpoint Asset Management wrote in a note.

“This suggests the economy is still running below its potential,” he added, suggesting the data made an interest rate cut more likely.

Fresh fruit prices rose 11.5 per cent year-on-year, and pork, the most consumed meat in the country, jumped 9.6 per cent.

The cost of fuel for transport fell 6.4 per cent.

Globally, commodity and food prices are rising, though China has remained relatively unscathed by increases linked to the war in Ukraine.

“We think consumer price inflation will rebound in the coming months as the labour market tightens again,” analysts from Capital Economics said in a note.

“But it will be well below the government’s ceiling of around 3 per cent, and the increase in inflation will be far smaller than what was seen elsewhere when they opened up.”

China is targeting 5 per cent economic growth this year, one of the lowest targets in decades, but Premier Li Qiang warned last month that even this could be difficult to achieve.

Source: AFP