China’s inflation data for March produced small positive surprises, but remained tepid, withlittle sign that Beijing’s easing measures to date have significantly cut worrisome deflationarypressure.
That has led many to predict more easing measures in the pipeline, including more cuts toreserve requirement ratios for banks, although there is debate over how effective those mightbe at juicing inflation.
In March, China’s annual consumer inflation rate (CPI) stayed flat at 1.4 percent, above apoll’s projected 1.3 percent. Producer prices (PPI) fell slightly less than projected, contracting4.6 percent rather than the forecasted repeat of February’s 4.8 percent pace.
The March inflation data is the first in a batch of key economic data that will climax withrelease of first-quarter growth numbers on April 15. A Reuters poll expects growth to be a six-year low of 7 percent.
Pressure on margins
PPI has now been in negative territory for three years, highlighting sustained pressure onprofit margins at Chinese companies – in particular heavy industry – as Beijing struggles torestimulate headline growth.
The higher-than-expected CPI was driven by a sudden rise in pork prices, which have been adrag on CPI every month since December 2013.
But consumer inflation is still far short of Beijing’s official 3 percent target for 2015, and someeconomists see that goal at risk.