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China’s consumer inflation eased in March after hitting an eight-year high in February, while factory gate prices fell as economic pressure from the coronavirus pandemic persisted.

The national bureau of statistics said that the consumer price index, a measure of the cost of household goods and services, rose 4.3 per cent in March compared with the same month a year earlier. In February prices had risen 5.2 per cent year-on-year, driven by rocketing prices for consumer goods.

The smaller-than-expected increase in prices — a Reuters poll of analysts suggested a 4.8 per cent rise — suggested that supply was increasing but consumer demand continued to be a concern, said Hao Zhou, an economist at Commerzbank.

“Stimulus is on the way,” said Mr Hao, adding that the scale and nature of measures to spur demand were still unclear.

Beijing has rolled out a series of targeted stimulus measures to support stricken companies, but has resisted announcing a big stimulus package similar to the one it launched in the aftermath of the global financial crisis.

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“As far as we see from the public domain, special government bonds and local government bonds, plus a widening budget deficit, are in the pipeline,” Mr Hao said.

The March inflation data are the first in a series of indicators that will be watched by economists and investors for clues about the trajectory of the world’s second-largest economy. Next week the National Bureau of Statistics will release its estimates for first-quarter economic output, foreign trade, investment and consumption.

While analysts are predicting China’s first official year-on-year GDP contraction since 1976, a pick-up in March’s data would signal that the domestic economy has scope to recover relatively quickly. However, the pandemic’s devastating impact on China’s largest export markets in North America and Europe could weigh on growth prospects, leading to a second-quarter contraction that would deliver the country’s first technical recession in more than 40 years.

China’s economic activity has shown signs of recovering in recent weeks and official statistics say most businesses have reopened. Wuhan, where the outbreak began, lifted a ban on travel in and out of the city this week after 76 days in lockdown.

The statistics bureau said that the lower level of inflation in March was largely due to falling prices of foodstuffs. The release of strategic pork reserves helped to cut pork prices by 18.8 per cent month-on-month. In February a freeze on transport — as part of the efforts to stem the spread of the virus — combined with the effects of a supply shortage caused by last year’s herd culls to combat African swine fever to push the price of pork over 50 yuan per kilo, an unusually high level for the time of year.

China’s producer price index, which reflects the prices of goods measured at the factory gate, fell 1.5 per cent year-on-year after a 0.4 per cent decrease in February, in part due to the drop in global prices for steel, crude oil and other commodities, the bureau said.

The greater-than-expected fall also reflected “the intensifying contradiction of supply recovery with listless demand”, Citic Securities said in a note.

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