China’s consumer prices fell for the second consecutive month in March, while factory-gate deflation worsened. This decline comes as an escalating U.S. trade war raises concerns about increasing inventories of unsold exports, which could drive domestic prices even lower.
The world’s second-largest economy has experienced a rocky start this year. Although there has been a nascent recovery in retail sales and strong growth in factory activity, these positive developments have been overshadowed by rising unemployment and deflationary pressures, leading to calls for more economic stimulus.
CPI data
The consumer price index (CPI) dropped 0.1 percent last month compared to a year earlier, according to data from the National Bureau of Statistics released on Thursday. This decline was slower than February’s 0.7 percent drop but fell short of a Reuters poll forecast, which anticipated that prices would remain flat.
Impact of global economic turbulence
The weak data emerges during a turbulent week for the global economy, as financial markets have been unsettled following the implementation of sweeping U.S. tariffs against all its trading partners. While U.S. President Donald Trump provided a partial reprieve on Wednesday by retracting some tariffs, his decision to continue increasing levies on China has only intensified the trade war between the world’s two largest economies.
Monthly and yearly CPI trends
The CPI fell 0.4 percent month-on-month, compared to a 0.2 percent decline in February, and missed an estimated 0.3 percent drop. Additionally, the producer price index (PPI) declined 2.5 percent in March from a year earlier, marking the weakest reading in four months. This decline was steeper than the 2.2 percent fall in February and exceeded the forecasted 2.3 percent drop.
