China’s consumer prices rise for third straight month in April, signalling demand recovery

BEIJING: China’s consumer prices rose for a third straight month in April, while producer prices extended declines, signalling an improvement in domestic demand, as Beijing navigates challenges in its bid to shore up a shaky economy.

The closely watched numbers follow better-thanexpected imports data for April, suggesting a flurry of policy support measures over the past several months may be helping consumer confidence.

Consumer prices edged up 0.3 per cent in April from a year earlier, data from the National Bureau of Statistics showed on Saturday, versus a rise of 0.1 per cent in March and a Reuters poll forecast for an increase of 0.2 per cent. “Strip out food and energy prices, and the consumer inflation data suggests a comeback in demand, especially in services,” said Xu Tianchen, senior economist at the Economist

Intelligence Unit.

Core inflation, excluding volatile food and fuel prices, grew 0.7 per cent in April, up from 0.6 per cent in March.

Overall the consumer price index (CPI) rose 0.1 per cent from the previous month, beating a forecast fall of 0.1 per cent in the poll and reversing a drop of 1 per cent in March.

Most China watchers say Beijing still has its work cut out, though, and the momentum might prove unsustainable, as official surveys show cooling factory and services activity, while a lengthy housing crisis shows no sign of easing, boosting the case for more policy support. “Price hikes by utility companies is another potential driver,” Xu added.

“The fiscal strains some local governments are facing affect the subsidies they receive, which could be forcing them to pass the extra cost on to households to make ends meet.”

Officials are grappling with municipal debt of $13 trillion, and the State Council, or cabinet, has told heavily indebted local governments to delay or halt some state-funded infrastructure projects.

“The prices data suggests that domestic demand is recovering, supply and demand continues to improve and the outlook for domestic demand and price recovery is optimistic,” said Zhou Maohua, a macroeconomic researcher at China Everbright Bank.

“However, consumer prices remain low and the industrial manufacturing sector is still under pressure, reflecting insufficient effective demand and that recovery in the sector is still not sufficiently balanced.”

The producer price index (PPI) dropped 2.5 per cent in April from a year earlier, easing from a slide of 2.8 per cent the previous month but extending a 1-1/2-year-long stretch of declines. On Friday, China’s central bank said it would make monetary policy flexible, precise and effective and promote a moderate recovery in consumer prices to consolidate economic recovery. The comments in a quarterly monetary policy report follow remarks in April by the Politburo, a topdecision making body of the ruling Communist Party, that China will use policy tools, such as banks’ reserve requirement ratio and interest rates, to prop up growth.