BEIJING – Consumer and producer prices both accelerated last month, lifted by hefty increases in pork prices and higher oil prices, the latest sign that China’s economy may be stabilizing after a recent slowdown.
The pickup in inflation in March reversed downtrends for both the consumer prices, which had been decelerating since late last year, and producer prices, which began softening last summer.
March’s consumer-price index rose 2.3% from a year earlier, compared with a 1.5% gain in February, the National Bureau of Statistics said on Thursday. The producer-price index rose 0.4% in March from a year ago, compared with a 0.1% on-year increase in February.
Both readings were generally in line with economists’ forecasts. Coming on top of a recent pickup in gauges of factory activity, some economists said the comfortably higher inflation numbers hint that the economy is pulling out of last year’s sharp slump and should encourage policy makers to continue to boost credit and other support measures.
The increase in the consumer-price index was mainly driven by surging vegetable prices, after cold rainy weather, and rebounding pork prices due to supply disruptions caused by African swine fever that has forced farmers to cull hundreds of thousands of pigs. Pork prices in March rose 5.1% from a year ago, while fresh vegetable prices surged 16.2%.
“The impact of the vegetable price surge could be fleeting, but pork prices will continue to climb and reach its peak of the year in the second quarter,” said Lin Shu, an analyst with China Merchants Securities.
Lin predicted that while the rise in the consumer-price index may gradually inch closer to the government’s 3% ceiling in the second quarter, it won’t stay at the high level long enough to prompt the central bank to tighten monetary policy.
Economists generally think the People’s Bank of China is more likely to continue to ease credit after China’s economic growth slowed to its weakest in about three decades last year and as growth continues to face headwinds. The central bank has lowered the amount of funds banks are required to keep in reserve five times since the start of 2018, freeing up more money for lending, and vowed last month to do more to stabilize growth and help small cash-strapped private businesses.
Producer-price inflation rose faster in March thanks to rising oil prices, official data showed. That may ease pressure on some industrial companies whose profits have been eroded by muted product prices in recent months.
Subdued producer prices have affected the operations of many Chinese factories, economists said, putting pressure on the nation’s investment, consumption and employment.