China’s Wholesale Prices Slide in March While Inflation Edges Up

(Beijing) — A major gauge of wholesale prices in China eased in March for the first time in seven months, while consumer inflation edged up after falling to a two-year low in February, official data showed Wednesday.

China’s consumer price inflation (CPI), a main measure of inflation based on prices at the consumer level, edged up 0.9% in March year-on-year, up slightly from a gain of 0.8 % in February, National Bureau of Statistics (NBS) data showed — in line with an average forecast of 12 economists polled by Caixin.

Food prices, the biggest component of CPI, fell by 4.4% year-on-year in March versus a 4.3% drop in February. Vegetables and pork prices fell by 27.9% and 3.2% respectively, dragging down the CPI year-on-year increase by a combined 1.04 percentage points, said Sheng Guoqing, an NBS analyst, in a statement accompanying the data release.

Meanwhile, nonfood inflation picked up in March, with rising costs experienced in the education and recreation, medical care, housing, transportation and communication sectors, contributing a combined 1.44 percentage points to the year-on-year CPI increase, Sheng said.

On a month-on-month basis, consumer inflation in March was down 0.3%. Food prices slid 1.9%, dragging down the month-on-month CPI decrease by 0.39 percentage points.

Prices of agricultural products followed a downward trend as supply increased with rising temperatures, Hu Yuexiao, an analyst with Shanghai Securities Co. Ltd., said in a research note.

The sharp decline in food prices was also attributed to agricultural supply-side reform, an economist with China International Capital Corp. (CICC) said in a statement.

Core CPI, excluding energy and food prices, rose 2% from a year ago, generally in accordance with a trend toward stabilization reflected in the two preceding months.

Producer price inflation (PPI), a measure of product prices at the producer level and a leading indicator of consumer inflation, increased 7.6% last month from a year earlier, down from a gain of 7.8% in February, when it was at a nine-year high, according to NBS data.

PPI cooled in March after logging a six-month winning streak since September, when it bounced back to positive territory after 54 straight months due to a recovery in international commodity prices.

On a month-on-month basis, PPI rose a mere 0.3%, compared with a 0.6% increase in February, reflecting a trend of softening growth seen over four consecutive months since December.

The moderation in PPI was mainly driven by a pullback in upstream prices such as coal mining and oil, according to CICC’s research note.

Coal mining, oil refining and oil and natural gas acquisition prices were down 0.6%, 0.6% and 0.1% respectively.

Food prices in PPI also declined by 0.2% month-on-month in March.

Looking ahead, analysts at Nomura Group expect PPI inflation to continue to moderate in the coming months and CPI inflation to rise due to high property prices and the high PPI.

Wen Bin, chief analyst with China Minsheng Banking Corp. said the tame reflationary pressure will give more leeway to the central bank to stick to a neutral and prudent monetary policy.

Contact reporter Pan Che (chepan@caixin.com)