China’s Producer and Consumer Inflation Increased

The producer price index (PPI) increased 8.3% year-on-year, as stated by data from the National Bureau of Statistics (NBS); it fell from 8.8% growth in February but beat a forecast for a 7.9% incline in a Reuters poll.

The year-on-year PPI rise was slowly since April 2021; however, the monthly growth of 1.1% was the fastest in five months.

China’s consumer price index (CPI) inched up 1.5% year-on-year; the fastest pace in three months; after a gain of 0.9% in February and conquering the 1.2% rise tipped by a Reuters poll.

In March, the world’s second-largest economy came under downward pressure with ongoing coronavirus outbreaks and the manufacturing and service sectors reporting declines in inactivity.

Authorities have disclosed policies to support the economy, including more lavish fiscal spending and reductions in income tax for small firms.

China’s cabinet on Wednesday vowed more support measures for consumption and investment.

Weak Demand Is Present

A year ago, food prices dropped 1.5%, compared with a 3.9% plunge in February; this resulted in a drop of 0.28 percentage points in headline CPI.

The modest consumer inflation issues weak demand as the sentiment in consumption were dented by Beijing’s strict coronavirus control measures.

Hence, China reported 26,411 new asymptomatic cases on Sunday. More than 25,000 were in the financial hub of Shanghai, currently under a city-wide lockdown.

Iris Pang, chief economist for Greater China at ING, anticipates that Shanghai’s economy will shrink 6% this month if the current lockdown persists, equaling a 2% gross domestic product downfall for China.

Therefore, most analysts expect China’s central bank to lower borrowing costs and cut reserve requirements for banks or decrease the interest rate to pump more cash into the economy.