Consumer Price Index Turns Positive

After a period of decline, China’s Consumer Price Index (CPI) saw a month-on-month increase in April. Data indicates that while the CPI experienced a year-on-year decrease of 0.1%, mirroring March’s figures, there are emerging positive trends in specific sectors.The Producer Price Index (PPI) fell 2.7% year-on-year, a slight expansion from the previous month, and remained consistent month-on-month with a 0.4% decrease.

Notably, prices in consumer goods industries, including food manufacturing and high-tech sectors, are showing signs of enhancement. Experts suggest that the current low price levels, coupled with recent financial policies such as reserve requirement ratio reductions and interest rate cuts, are poised to support a reasonable rebound in prices.

Expert Perspectives on Economic Resilience

Despite external pressures, China’s economic fundamentals remain strong. Although international imported factors have a certain pull-down impact on the prices of some industries, my country’s economic foundation is stable and resilient.Various macro policies work together to promote high-quality development, and prices in some areas show positive changes, said Dong Lijuan, chief statistician of the Urban department of the National Bureau of Statistics.

Factors Influencing CPI decline

The 0.1% year-on-year CPI decline in April matches that of March. Wang Qing, chief macro analyst at Oriental Jincheng, attributed this to the drop in international crude oil prices, which affected domestic energy prices and counteracted the narrowing year-on-year decline in food prices.

Energy prices fell by 4.8% year-on-year in April, a 2.2 percentage point increase from March. Gasoline prices, specifically, fell by 10.4% year-on-year, impacting the CPI by approximately 0.38 percentage points.

Month-on-Month CPI Increase Driven by Food and Travel

From a month-on-month perspective, the CPI shifted from a 0.4% decline in March to a 0.1% increase in april.This 0.2 percentage point increase above the seasonal level was primarily driven by rebounds in food and travel service prices.

• Food Prices: The year-on-year decline in food prices narrowed, with a 0.2% month-on-month increase, surpassing seasonal expectations. Beef prices rose by 3.9% month-on-month due to reduced import volumes, while seawater fish prices increased by 2.6% month-on-month due to fishing moratoriums in some areas.
• Travel Services: Demand recovery and holiday factors led to significant rebounds in travel service prices. Air tickets rose by 13.5% month-on-month,transportation rental fees by 7.3%, hotel accommodation by 4.5%, and tourism prices by 3.1%.

Core CPI and Policy Impacts

The core CPI, excluding food and energy prices, rose 0.5% year-on-year, maintaining stability.Service prices rose by 0.3% year-on-year, and consumer goods prices rebounded slightly from a decrease of 0.4% last month to a decrease of 0.3%, indicating that the effects of a package of policies such as expanding domestic demand and promoting consumption are gradually emerging, noted Zhang Jingjing, chief macro analyst at China Merchants Securities.

PPI Decline and Contributing Factors

The PPI fell by 0.4% month-on-month in April, consistent with March. The year-on-year decline was 2.7%, a 0.2 percentage point increase from March.

Dong Lijuan explained that the month-on-month PPI decline was primarily due to international factors affecting prices in related domestic industries and seasonal declines in some domestic energy prices.

Positive Trends in Specific industries

Consumer goods trade-ins and other consumer-focused policies have effectively boosted demand for certain consumer goods and equipment manufacturing products, leading to price rebounds in related industries.

• Household washing machine prices saw a 0.3 percentage point narrowing in their year-on-year decline compared to March.
• Food manufacturing and new energy passenger car prices both experienced a 0.2 percentage point narrowing in their year-on-year declines.

The growth of high-tech industries has also driven price increases in related sectors. Such as:

• Wearable smart device manufacturing prices rose by 3.0% year-on-year.
• Aircraft manufacturing prices increased by 1.3% year-on-year.
• Micro-motor and component manufacturing prices rose by 1.2% year-on-year.

Furthermore, China’s continued efforts to promote trade diversification have expanded markets, leading to year-on-year price increases or narrowed declines in some export industries. Integrated circuit packaging and testing prices rose by 2.7% year-on-year, while special equipment manufacturing prices for semiconductor devices increased by 1.0% year-on-year.

Policy Support and Future outlook

Recently, the central bank and other departments have launched a package of financial support policies, including interest rate cuts and reserve requirements, indicating that the unusual countercyclical adjustment policies have begun to be fully implemented. We expect that new incremental policies, including fiscal efforts to promote consumption, will be introduced soon, which will bring significant support to subsequent price trends, said Feng lin, director of the Research and Development Department of Oriental Jincheng.