China Continues Manufacturing Pressure... April PPI -3.1% (Comprehensive)
[Asia Economy Beijing=Special Correspondent Park Sun-mi] The risk of deflation in China's industrial sector is intensifying due to the aftermath of COVID-19.
On the 12th, China's National Bureau of Statistics announced that the Producer Price Index (PPI) for April fell by 3.1% compared to the same period last year. This is the lowest figure in four years since April 2016, when it recorded -3.4%.
Economic experts had expected the April PPI to be around -2.5%, considering that the PPI growth rate in March was -1.5%, but the decline was much larger than anticipated. China's monthly PPI growth rates were 0% in January, -0.5% in February, -1.5% in March, and -3.1% in April, showing a trend of increasingly steep declines.
The sharp drop in April's PPI indicates that manufacturers have not yet shaken off the shock caused by the COVID-19 pandemic. Overseas orders have been canceled or postponed due to COVID-19, and domestic demand in China has also decreased, meaning manufacturers cannot charge the prices they want for their products.
Since the PPI reflects prices of raw materials, intermediate goods, and product shipment prices, it is considered a leading economic indicator that shows the vitality of the manufacturing sector. A prolonged period of negative PPI is generally interpreted as a precursor to deflation.
With economic vitality fading, the Consumer Price Index (CPI) growth slowed in April, giving the government more room to implement active monetary policy easing. The April CPI rose by only 3.3% year-on-year. This is not only lower than the 4.3% increase in March but also below the 3.7% CPI growth forecast made by experts for April. In terms of China's monthly CPI growth rate, this is the lowest since October last year, when it recorded 3.8%.
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The lower CPI growth rate is largely due to pork prices rising by only 96.9% year-on-year, significantly lower than the increases in March (116.4%) and February (135.52%). As pork demand is not as strong as before and prices have fallen, the food price inflation rate in April also dropped to 14.8%, down from 18.3% in March. The non-food price inflation rate in April was 0.4%, lower than the 0.7% increase in March.
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