China's CPI Rises 1.2% in April, PPI Up 2.8%

China's Consumer Price Index (CPI) rose for the seventh consecutive month last month. During the same period, the Producer Price Index (PPI) posted its highest growth rate in 45 months.

According to the National Bureau of Statistics of China on May 11, China's CPI in April increased by 1.2% year-on-year.

Shandong Province Qingdao Crude Oil Terminal in China. Photo by AFP Yonhap News.

This figure exceeds the expert forecast compiled by Reuters (0.9%), and represents a greater increase than the previous month (1%).

China's CPI had remained in negative territory until the third quarter last year, raising concerns about deflation (a decline in prices during an economic downturn). However, it turned positive at 0.2% in October last year and has continued to rise for seven consecutive months since then.

In April, the CPI rose by 0.3% compared to the previous month. Reuters had predicted a 0.1% decline.

Dong Lijuan, chief statistician at the National Bureau of Statistics, attributed the CPI increase to "fluctuations in international crude oil prices and increased travel demand during the holidays."

In April, airfares, car rentals, travel agency fees, and hotel accommodation costs rose by 29.2%, 8.6%, 4.5%, and 3.9%, respectively. These four items contributed 0.17 percentage points to the month-on-month CPI increase.

The price of gasoline in April surged by 19.3% year-on-year, while food prices fell by 1.6% as the prices of pork and fresh produce declined. The core CPI, which excludes the volatile food and energy sectors, rose by 1.2%.

The PPI in April rose by 2.8% year-on-year, marking the highest level in 45 months since July 2022. On a month-on-month basis, it increased by 1.7%.

This figure significantly exceeds both the Reuters forecast (1.6%) and the Bloomberg forecast (1.8%). According to Bloomberg, the PPI saw its largest increase since July 2022, during the COVID-19 pandemic.

China's PPI had been in negative territory for more than three years since October 2022 during the COVID-19 pandemic, but turned positive at 0.5% in March this year, ending a 41-month streak of declines.

The rise in the PPI in April appears to be due to surging energy prices as the Strait of Hormuz was effectively blockaded amid the war involving Iran.

Chief Statistician Dong explained that the increase in international crude oil prices drove price hikes in domestic oil-related industries, that demand in some domestic industries increased, and that improved market competition contributed as well—citing these three factors as the main reasons.

However, some point out that it is premature to say that long-standing concerns about deflation have completely disappeared. Bloomberg analyzed that energy supply disruptions caused by the Iran war have helped end deflation in China. However, it added that, due to sluggish domestic demand and signs of deterioration in the labor market, companies are unable to pass increased costs on to consumers, which is increasing pressure on profitability.

Analysts at Capital Economics noted, "There is a possibility that cost-push pressures could lead to broader inflation in the coming months," but also stated, "With oversupply issues unresolved in most industries and domestic demand still weak, there appears to be insufficient momentum for sustained economic stimulus."

This content was produced with the assistance of AI translation services.