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April 13, 2017

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CPI warms but PPI cools slightly

CHINA’S consumer inflation warmed up slightly in March while factory gate inflation cooled for the first time in six months, official data showed yesterday.

The Consumer Price Index, a main gauge of inflation, rose 0.9 percent year on year in March, 0.1 percentage points higher than February, the National Bureau of Statistics said yesterday.

The reading was in line with market consensus forecast of 1 percent.

The Producer Price Index, which measures costs of goods at the factory gate, rose 7.6 percent, 0.2 percentage points lower than February’s 7.8 percent, which was a eight-year record.

The reading beat market hopes of 7.5 percent.

Sheng Guoqing, a bureau analyst, said price rises in non-food sectors were overshadowed by price decline in food, resulting in mild inflation in March.

Non-food prices rose 2.3 percent year on year, 0.1 percentage points faster than February, while food prices dropped 4.4 percent and the decline was 0.1 percentage points wider than February.

Prices of fresh vegetables tumbled nearly 28 percent, resulting in a 0.95-percentage-point decline in the CPI.

The PPI reading showed that price hikes slowed in the oil, steel, chemicals and nonferrous metal industries.

Economists said both the CPI and PPI were generally stable in March, allowing the People’s Bank of China to keep a relatively tight monetary stance.

“While March headline PPI softened on base effect and CPI remained subdued with the weakness of food prices, the breakdown shows PPI non-commodity price and core CPI inflation continued to gain strength,” Morgan Stanley said in report a yesterday.

“We believe PPI year on year has peaked but a deep deflation is unlikely due to better industrial capacity utilization, and CPI will pick up gradually but still hover in PBOC’s comfort zone.”

The PBOC is set to continue to hike interbank rates and curb broad credit growth with tighter regulations, the report said.

The Australian and New Zealand Banking Group yesterday forecast a 2.4 percent increase in the CPI in 2017, higher than the 2 percent rise in 2016.


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