Shoppers and pedestrians are reflected in a mirrored store window on Beijing Road in Guangzhou, Guangdong Province. Analysts have pared their estimates for gains in consumer prices this year. Inflation will be 2.6 percent, according to the median estimate in a Bloomberg News survey of 51 analysts carried out in April.
Consumer inflation in China moderated to an 18-month low and the decline in factory-gate prices persisted, giving the government more scope to loosen policies if a growth slowdown deepens.
The consumer price index rose 1.8 percent from a year earlier in April, the National Bureau of Statistics said today in Beijing. That compares with the median estimate of 2.1 percent in a Bloomberg News survey and a 2.4 percent gain in March. The producer-price index fell 2 percent, the 26th straight decline, after a 2.3 percent drop the previous month.
Today’s data add to signs that domestic demand remains muted, with falling commodity prices exacerbating overcapacity in industries including steel and cement. The lack of inflationary pressure will allow the People’s Bank of China to relax monetary policy to support the economy if Premier Li Keqiang’s full-year goal of about 7.5 percent is threatened.
“We believe it is time for the PBOC to contemplate easing monetary policy further,” Liu Li-Gang, chief Greater China economist at Australia & New Zealand Banking Group Ltd. in Hong Kong, said in a note. The risk of deflation has risen, and cutting banks’ reserve-requirement ratio can help “meaningfully lower the lending rates facing Chinese enterprises,” Liu said.
Declining prices of vegetables and pork were the main reasons for April’s inflation reading, which is likely to be the lowest in the first half of the year, the statistics bureau said in a statement. “Prices in the future will maintain modest growth,” the agency said.
The benchmark Shanghai Composite Index (SHCOMP) of stocks rose 0.2 percent at 9:50 a.m. local time.
Inflation has remained at least one percentage point below the government’s full-year target of 3.5 percent every month this year. Food prices in April rose 2.3 percent from a year earlier, the NBS said, after a 4.1 percent gain in March. Non-food inflation was 1.6 percent, compared with a 1.5 percent pace the previous month.
The drop in the producer-price index compared with the median estimate of economists for a 1.9 percent fall and extends the longest stretch of declines since a 31-month slide that started in 1997.
The figures today mean “policy easing becomes more likely, as risks in property loom and inflation drops,” Zhang Zhiwei, chief China economist at Nomura Holdings Inc. in Hong Kong, said in an e-mailed note. He reiterated his forecast for a cut in banks’ reserve-requirement ratio this quarter.
China Coal Energy Co. last month reported a drop of about 67 percent in first-quarter net income and warned of a decline in first-half profit due to “prolonged low coal prices.”
The statistics bureau will publish April industrial production and retail sales and January-April fixed-asset investment data next week. A customs administration report yesterday showed China’s exports unexpectedly increased 0.9 percent last month from a year earlier, recovering from a 6.6 percent fall in March, while imports increased 0.8 percent after an 11.3 percent drop the previous month.
Analysts have pared their estimates for gains in consumer prices this year. Inflation will be 2.6 percent, according to the median estimate in a Bloomberg News survey of 51 analysts carried out in April, the same pace as in 2013. The median projection in a March survey was 2.8 percent.