In April, China's consumer prices marked a third consecutive month of growth, while producer prices continued to decline, indicating a mixed picture for the country's economic recovery efforts amidst ongoing challenges. The National Bureau of Statistics reported a 0.3% increase in consumer prices compared to the previous year, surpassing expectations and signaling a potential improvement in domestic demand. This follows positive imports data for April, suggesting that government policy measures implemented over recent months may be bolstering consumer confidence.
Analysts note that beyond the headline figures, the core inflation rate, which excludes volatile food and fuel prices, also saw a modest uptick to 0.7% in April. This indicates a potential resurgence in demand, particularly in the services sector, according to Xu Tianchen, senior economist at the Economist Intelligence Unit.
However, concerns remain about the sustainability of this momentum. Despite the uptick in consumer prices, official surveys indicate a cooling trend in both factory and services activity. Additionally, the persistent housing crisis presents a significant challenge to economic stability, underscoring the need for continued policy support.
One factor contributing to rising prices is the potential impact of utility companies' price hikes. Xu Tianchen highlights that fiscal strains faced by local governments could be forcing them to pass on extra costs to households, further straining consumer budgets.
China's central bank has reaffirmed its commitment to flexible and effective monetary policy to support economic recovery. In a quarterly monetary policy report, the bank emphasized the importance of promoting a moderate increase in consumer prices. This aligns with earlier statements by the Politburo, signaling a coordinated effort to utilize policy tools such as banks' reserve requirement ratios and interest rates to stimulate growth.
Zhou Maohua, a macroeconomic researcher at China Everbright Bank, remains cautiously optimistic about the outlook for domestic demand and price recovery. While there are signs of improvement, challenges persist, particularly within the industrial manufacturing sector.
The continued decline in producer prices, with the producer price index dropping 2.5% year-on-year in April, reflects ongoing pressures on businesses. To address this, analysts emphasize the need for proactive policy measures to stimulate effective demand and rebalance the economy.
Looking ahead, achieving China's economic growth target of approximately 5% in 2024 will require sustained policy support. Analysts stress the importance of managing expectations and creating conducive conditions for increased consumption to drive growth amidst ongoing uncertainties in the global economic landscape.