China's consumer prices rise for third month, signaling demand recovery
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[May 13, 2024] By
Joe Cash
BEIJING (Reuters) -China's consumer prices rose for a third straight
month in April, while producer prices extended declines, signaling an
improvement in domestic demand, as Beijing navigates challenges in its
bid to shore up a shaky economy.
The closely watched numbers follow better-than-expected 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% in April from a year earlier, data from
the National Bureau of Statistics showed on Saturday, versus a rise of
0.1% in March and a Reuters poll forecast for an increase of 0.2%.
"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% in
April, up from 0.6% in March.
Overall the consumer price index (CPI) rose 0.1% from the previous
month, beating a forecast fall of 0.1% in the poll and reversing a drop
of 1% 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.
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"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.
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January 12, 2024. REUTERS/Florence Lo
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"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% in April from a year
earlier, easing from a slide of 2.8% 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 top-decision making body of the ruling
Communist Party, that China will use policy tools, such as banks'
reserve requirement ratio (RRR) and interest rates, to prop up
growth.
"Considering the judgment of the Politburo meeting that 'effective
demand is still insufficient...' the policy support should take
advantage of the momentum, by strengthening expectation management
and creating more consumption scenarios," said Bruce Pang, chief
economist China at Jones Lang LaSalle.
Many analysts say China's economic growth target of about 5% in 2024
will be a challenge to achieve without further policy support.
(Reporting by Joe Cash and Qiaoyi Li; Editing by William Mallard and
Clarence Fernandez)
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