China's factory inflation slows as consumer price gains ease

[BEIJING] China's factory inflation slowed for a fifth month while the consumer price index (CPI) retreated from a four-year high.

The producer price index rose 3.1 per cent in March from a year earlier, compared with the projected 3.3 per cent rise in a Bloomberg survey and 3.7 per cent in February. The consumer price index climbed 2.1 per cent, the statistics bureau said Wednesday, versus a forecast of 2.6 per cent and 2.9 per cent in February.

The slowest factory inflation in more than a year may offer limited support to the world reflation cycle, amid rising trade tensions that may weigh on synchronized global growth. Domestic consumer prices are forecast to rise this year, while tariffs added to imports of US products from soya beans to cars may boost inflation if implemented.

The slower PPI (producer price index) reading is in line with a Bloomberg Economics tracker, which uses daily movements of commodity prices to predict the monthly PPI reading.

"For now, there's no sign of China exporting inflation to the world," said Li Wei, a senior economist at Standard Chartered Plc in Shanghai, who predicts both PPI and CPI will stabilise in the range of 2 per cent to 3 per cent in the second half of 2018.

"Policymakers won't focus on inflation this year, instead they'll prioritise tasks such as cutting leverage."

The fading of the Chinese New Year holiday effects in March was the main reason for the CPI deceleration, the statistics bureau said in a statement released with the data.

BLOOMBERG