Consumer price inflation in China has reached its lowest level in 18 months, and the pace of decline in factory prices accelerated in March due to continued weak demand, justifying further action by policymakers to support uneven economic recovery. The National Bureau of Statistics announced today, Tuesday, that the "consumer price index rose 0.7% year-on-year, marking the slowest pace since September 2021, and lower than a 1% increase in February."
Economist at Guotai Junan International, Zhu Hao, stated, "The March inflation report indicates that the Chinese economy is going through a deflationary phase, which means there is more room for monetary policy easing to support demand." The producer price index dropped 2.5% year-on-year, the fastest pace since June 2020, compared to a 1.4% decline in February. The producer price index has declined for six consecutive months.
The Chinese yuan hit its lowest level in over a week against the dollar on Tuesday morning following the release of the data, as investors increased bets on the possibility of local interest rate cuts. The benchmark Shanghai stock index fell 0.25%, retreating from a slight gain made at the open.
Food price inflation, a major driver of the consumer price index, slowed to 2.4% year-on-year, down from 2.6% the previous month. Month-on-month, food prices decreased by 1.4%. The government has set a target for the average consumer price inflation in 2023 at around three percent.
