Low CPI in March suggests Chinese economy growing below potential

china WTOThe Chinese economy

Bankinter | CPI falls back in March to +0.7% year-on-year from +1.0% and Industrial Prices remain negative at -2.5% year-on-year. This is the lowest CPI reading since September 2021 and Industrial Prices (IPP) since June 2020. The CPI Underlying Rate stands at +0.7% year-on-year from +0.6% previously.

Analysis: Consumer and producer price inflation remains at exceptionally low levels in China. CPI has remained below the government’s target of +3% for more than a year. These low inflation levels suggest that the economy is growing below its potential and would leave room for further stimulus, both monetary and fiscal, to boost the pace of growth. So far, China’s central bank (PBoC) has provided support to the economy by reducing the reserve ratio for banks, but has not cut rates. For its part, the government has provided support with an infrastructure plan. New infrastructure spending plans or subsidies for electric vehicles could be approved.

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