Consumer prices in China rose 0.1% in April, the lowest price in two years
The People̵[ads1]7;s Bank of China (PBOC) building in Beijing, China, Tuesday, April 18, 2023. China’s economy grew at its fastest pace in a year in the first quarter, putting Beijing on track to meet its growth target for the year without adding much stimulus , while helping to cushion the global economy against a downturn. Source: Bloomberg
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China’s consumer price index rose 0.1% in April year-on-year, the slowest since early 2021. Month-on-month, prices fell 0.1%.
Economists polled by Reuters expected to see consumer prices rise 0.4% from a year ago and remain unchanged from last month.
April’s reading comes after China’s inflation rate fell to 0.7% in March after marking a recent peak of 2.8% in September.
Inflation in China was led by food and services, according to the National Bureau of Statistics – food prices rose 0.4% and service prices rose 1% from a year ago. In the meantime, the prices of consumer goods fell by 0.4 per cent.
The onshore Chinese yuan weakened 0.04% to 6.9428 against the US dollar shortly after the release.
China’s producer price index, which measures prices paid by wholesalers, fell 3.6%. Economists polled by Reuters had expected to see a 3.2% year-on-year decline after a 2.5% drop last month.
That’s a stark contrast to the latest overnight US inflation data, which showed consumer prices rose 4.9% in April – slowing in the wake of the Federal Reserve’s efforts to tame inflation by raising interest rates 10 times in a row.
Inflation has largely moderated in China since the reopening, prompting market watchers to question whether the world’s second-largest economy is headed for deflation, BofA chief economist Helen Qiao wrote in a Tuesday note.
“It almost seems that when major central banks find it difficult to tame the inflationary beast [People’s Bank of China] would have ranked high on the inflation control scorecard,” she wrote.
Qiao added that China has managed to keep CPI inflation at an average of 1.8%, which is close to the lowest 3-year average reading since 2003.
Now, China’s core CPI inflation is already well below Japan’s levels, BofA economists noted.
Although not yet at deflationary levels, China’s low inflation is likely driven by insufficient demand.
“Households, although they have already seen a notable pent-up demand from tourism during the past holiday season, remain cautious about spending on goods, especially for big-ticket items (appliances, cars, etc.),” Qiao wrote in the note.
“The weak labor market as well as the slower recovery in the real estate market continued to weigh on consumer sentiment,” she wrote.
— CNBC’s Lim Hui Jie contributed to this report
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