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China Inflation March 2024

China: Consumer price inflation moderates in March; producer prices fall

Consumer inflation came in at 0.1% in March, which was down from February’s 0.7% and below market expectations of 0.4%. Prices for transport and several foodstuffs were lower year-on-year in March, largely offsetting higher health and education, culture and entertainment prices.

Consumer prices dropped 1.00% over the previous month in March, swinging from the 1.00% increase logged in February. March’s result marked the weakest reading since March 2020.

Meanwhile, producer prices fell 2.8% on an annual basis in March, which was a sharper drop compared to February’s 2.7% decrease.

Our Consensus is for price pressures in China to stay weak this year amid tepid domestic demand. While consumer price inflation is seen picking up later this year, it will likely remain one of the lowest rates in Asia.

On the latest data and the outlook, United Overseas Bank’s Ho Woei Chen said:

“We revise down our forecast for China’s headline inflation to 0.7% in 2024 (from 1.0%) and PPI to -1.0% (from -0.2%). We still expect the PBOC to moderately increase monetary policy support this year but further easing in the near-term will be constrained by CNY weakness as market pushes back expectation of Fed’s rate cuts to the later part of the year.”

Goldman Sachs’ analysts commented:

“Moderation in food price inflation and tourism-related services prices inflation were the major drivers behind the drop in headline CPI inflation, likely due to abating demand after the Lunar New Year. PPI deflation widened primarily on weak upstream sector prices. Incorporating soft Q1 inflation prints lowers our full-year 2024 forecasts of headline PPI inflation to -1.1% yoy (vs. -0.3% yoy previously), while our headline CPI inflation forecast remains below consensus at 0.4%.”

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