China's Consumer Prices Rise in April, Producer Prices Extend Declines: Economic Recovery Concerns

In April 2023, China's economic indicators showed mixed signals, with consumer prices experiencing a steady increase and producer prices continuing to decline.

Consumer Price Index (CPI) Trend

The consumer price index (CPI) in China rose by 0.3% in April 2023 compared to the previous year, marking the third consecutive month of increase. This acceleration from a rise of 0.1% in March indicated resilient domestic demand, defying concerns about the economic recovery. The CPI also rose by 0.1% from the previous month, signaling a reversal from the 1% drop in March.

Producer Price Index (PPI) Decline

In contrast, the producer price index (PPI) dropped by 2.5% in April 2023 compared to the previous year, albeit at a slower rate than the 2.8% decline recorded in the previous month. This downward trend in producer prices reflected ongoing challenges in the economy, particularly in the housing sector.

Impact on Economic Growth and Policy Response

China's cooling factory and services activity, coupled with a protracted housing downturn and jobless fears, raised concerns about the momentum of economic growth. In response, the Politburo emphasized a commitment to using policy tools, such as banks' reserve requirement ratio (RRR) and interest rates, in a flexible manner to provide increased support for the economy.

Core Inflation and Market Outlook

Core inflation, which excludes volatile food and fuel prices, grew by 0.7% in April 2023, up from 0.6% in March. The data indicated a need for careful monitoring of inflationary pressures amid the evolving economic landscape in China.