China ‘s Inflation Rises in March, Raises Economic Concerns

China’s consumer price index (CPI) grew by a lower than expected 0.1 per cent year on year in March, the National Bureau of Statistics said on Thursday. This has raised concerns about China’s economic recovery after another weak consumer price index report.

The National Bureau of Statistics announced on Thursday that China’s CPI rose a meager 0.1% year-over-year in March, down from 0.7% in February.

This follows a period of inconsistent inflation since mid-2023, with China teetering between very low inflation and deflation. Unlike other nations grappling with post-pandemic inflation, China’s CPI has not surpassed 3% year-over-year since 2021 and has hovered near zero in recent months.

The low CPI reading underscores Beijing’s need to speed up interest rate cuts, doing so could help alleviate the mortgage burden on residents and help allocate more funds towards consumption.

Annual core inflation, which strips out on volatile food and energy prices, was 0.6%, down on February’s 1.2%. On a month-on-month basis, CPI fell 1%, reversing February’s 1% increase. Analysts had been expected a 0.5% drop month-on-month.

Year-on-year, producer prices fell by 2.8%, adding to February’s 2.7% slide. Month-on-month, PPI was 0.1% lower. Since the pandemic, China’s economy has been plagued by a steep correction in property prices and demand, and cautious consumers.

In one indication of the depth of the China real estate market troubles, the Hang Seng Mainland Properties Index, made up of the nation’s largest listed property developers, has fallen 84.5% since its peak in January of 2020.

Additionally, manufacturing purchasing manager index (PMI) reports from China, from Caixin/S&P Global and the NBS, in recent months have pointed to a contracting factory sector, although both indices in March did marginally rise into the expansion zone.

Underlining outlooks that China’s economy is struggling, the Asian Development Bank on Thursday issued an estimate that the nation’s gross domestic product will grow by 4.8% in 2024, below Beijing’s goal of 5%, and slowing from the 5.2% GDP expansion posted in 2023.

Credit-rating agency Moody’s Investors Service recently predicted China’s GDP will expand by only 4% in 2024, and in early March issued a report entitled, “Latest policies are unlikely to revive China’s property sales in the near term.”

Separately, China’s producer price index (PPI), which measures costs of goods at the factory gate, decreased by 2.8% year-over-year in March, the NBS reported. In February the PPI declined by a slightly more modest 2.7% on year.

The decline in producer prices also aggravated worries that economic demand in China is faltering, and that the industrial sector has too much capacity.