Economist at UOB Group Ho Woei Chen reviews the latest inflation figures in China.

Key Takeaways

“Headline inflation was near flat at 0.1% y/y, -0.1% m/m in Apr. The data continues to paint an uneven economic recovery in China as the demand recovery has failed to lift prices.”

“The weak price trend was largely due to declines in some of the food components while persistent falls in prices of transport and communication and residential costs continued to weigh down non-food inflation but service inflation edged higher in Apr. Lower domestic prices were also partly due to the sales and promotions by merchants.”

“China’s PPI remained in deflation for the 7th consecutive month with the decline in prices accelerating to -3.6% y/y.”

“Overall, China’s headline and core inflation averaged 1.0% y/y and 0.7% y/y respectively in Jan-Apr while PPI averaged -2.1% y/y. We now see CPI and PPI undershooting our forecast of 2.0% and -1.0% in 2023.”

“Monetary policy will stay accommodative with the prospect of another 25 bps cut to the RRR later this year should credit growth slow.”