At just 0.1%, inflation hits two-year low in April

2023-05-11 07:38:00

Unlike the rest of the world, China (almost) does not experience inflation. The consumer price index (CPI), the main gauge of inflation, rose by barely 0.1% over one year in April, once morest 0.7% one month. earlier, according to figures from the National Bureau of Statistics (BNS) published this Thursday, May 11.

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It’s even less than expected. Analysts polled by the Bloomberg agency anticipated a larger increase (0.3%), once morest a backdrop of an upturn in activity in China since the lifting of anti-Covid health restrictions at the end of 2022.

The CPI index thus reached, in April, its lowest level since February 2021, with food prices having increased by only 0.4% over one year.

Note, however, that April’s figures were affected by last year’s high comparison basis, said Dong Lijuan, an analyst at the BNS, in a statement. Food prices were, in fact, particularly high in April 2022 during the confinement of several large cities such as Shanghai due to the Covid, because the logistics chains were then seized up.

Crossing below the 0% mark expected

The level of inflation in China is far from those observed elsewhere, particularly in Europe where prices rose slightly in April. Inflation in the euro zone (the 20 countries to have adopted the single currency) actually reached 7% last month over one year, following 6.9% in March, interrupting a series of five consecutive monthly declines. It reached 5.9% in France, also rising once more since it was 5.7% in March. In contrast, the United States is seeing its consumer prices continue to fall. Last March, inflation even reached its lowest level in two years at 5% over one year.

For its part, Chinese inflation might fall further in the coming months.

“China will probably experience a short period of CPI passage over the next few months” below the 0% mark, estimates the economist Zhiwei Zhang, of the firm Pinpoint Asset Management.

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An “unbalanced” recovery

China lifted most of its draconian health restrictions in December, paving the way for a recovery in activity which is, however, struggling to materialize in certain sectors. “The economic recovery seems unbalanced at this stage” in China, with a service sector “which normalizes” while “the manufacturing sector remains in decline” for now, says expert Zhiwei Zhang.

In April, China recorded a decline in its exports (+8.5% over one year, once morest +14.8% in March) and a further decline in its imports (+7.9% over one year), according to the Customs. “The contraction in imports is partly due to slowing global demand, which in turn affects China’s imports of parts and components,” Fait remarquer Zhiwei Zhang.

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Finally, producer prices fell further into deflation, a sign of sluggish domestic demand and lower costs for raw materials such as iron ore and crude oil. The producer price index (PPI) continued to fall (-3.6%) according to the SNB, for the seventh consecutive month, suggesting that further post-COVID support measures may be needed.

However, China is still aiming for a growth target of around 5% this year, one of the weakest in decades. It would, however, be better than 2022, when its gross domestic product (GDP) grew by 3%. Still, even this threshold might be difficult to reach, Chinese Premier Li Qiang has already warned.

(with agencies)