China’s consumer inflation last month slowed to the weakest pace in two years, while producer prices fell further into deflation, fueling debate about whether more policy stimulus is needed.
The consumer price index (CPI) rose 0.1 percent from a year earlier, the Chinese National Bureau of Statistics (NBS) said yesterday, reflecting muted domestic demand as well as base effects from April last year’s Shanghai lockdown.
Core CPI, which excludes volatile food and energy costs, was unchanged at 0.7 percent.
Photo: Bloomberg
Producer prices fell 3.6 percent last month as commodity costs softened. The figure was more than March’s drop and deeper than economists had expected.
“There is still a big gap between demand and its pre-pandemic trend,” Australia & New Zealand Banking Group Ltd senior China strategist Xing Zhaopeng (邢兆鵬) said.
“We do not think domestic demand can improve significantly in the near-term,” Xing added, estimating that it would take three to five years to rebound.
China’s economic growth accelerated to a one-year high in the first quarter, but recent data on contracting manufacturing activity and weakening trade have flashed warning signs that the recovery might be waning.
That has created speculation about whether the central bank would ease policy — and they have some scope to do so, given the US Federal Reserve signaled a potential pause in interest rate hikes and the latest data showed US inflation cooled somewhat last month.
Chinese banks might also have room to lower lending rates going forward after some of them cut their deposit rates recently.
A high base of comparison with April last year weighed on last month’s data, NBS analyst Dong Lijuan (董莉娟) said in a statement.
Consumer prices had increased rapidly then as COVID-19 lockdowns in major cities — including Shanghai — battered supply chains and pushed people to stockpile food.
Slower rises in food and energy costs pushed inflation lower. Food prices rose 0.4 percent last month from a year earlier, compared with a 2.4 percent 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.
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