China’s consumer inflation quickened in April, holding above zero for a third month, while industrial prices extended a long decline that highlights weak demand in the economy.
The consumer price index rose 0.3% from a year earlier, the National Bureau of Statistics said Saturday. That compares with an increase of 0.1% in March and a median forecast of 0.2% in a Bloomberg survey of economists.
Factory-gate prices remained stuck in deflation, as they’ve been since late 2022, with the producer price index sliding 2.5% in April from a year earlier. Economists surveyed by Bloomberg had expected a 2.3% drop after the index declined 2.8% in March.
The numbers suggest that deflationary pressure remains a threat to China’s economy, despite green shoots in the manufacturing sector and robust exports.
The government has struggled to spur higher household spending amid a real estate slump and a weak job market. Falling producer prices are squeezing companies’ profits and making them reluctant to invest. A recent survey of more than 20,000 retailers by the China General Chamber of Commerce showed that average order values contracted by the most in nine months, even though total sales expanded as customer traffic grew during the Labor Day holiday.
The latest data showed “economic momentum and social demand have continued to recover,” said Bruce Pang, chief economist for Greater China at Jones Lang LaSalle Inc. “However, there are still quite big structural divergences between prices in goods and services, as well as upstream and downstream sectors. Policy support still needs to be stepped up and implemented in an effective way.”
Some of the rise in consumer prices may be due to administrative decisions rather than any improvement in demand. Local governments have been increasing utility costs and train fares in recent months, a move that could push the price index higher but leave households with less spending power for other purchases.
More than 130 cities and counties have announced hikes in residential natural gas prices, while a few others such as Shanghai and Guangzhou have increased charges for water, according to a report by Tianfeng Securities Co. Another study by Zheshang Securities estimated that higher utility and rail fees could add between 25 and 101 basis points to producer-price inflation, and between 18 and 72 points to the CPI.
Written by: Bloomberg News — With assistance from John Liu, Fran Wang, Yujing Liu, Qizi Sun, and Sarah Zheng @Bloomberg
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