- Mizuho Securities Asia Ltd.
China's consumer inflation held steady in April, giving the People's Bank of China more room to ease monetary policy as the world's second-biggest economy combats tepid demand. According to the National Bureau of Statistics, China's consumer-price index increased 2.3% from a year earlier in April, unchanged for the third month in a row with higher vegetable and pork prices offset by lower fruit and egg prices. However, the CPI figure undershot a median 2.4% gain projection. Food prices account for approximately one-third of the weighting used to calculate China's CPI, thus higher pork prices is likely to keep consumer inflation above 2% until early 2017.
Concerning producer prices, deflation is set to remain for some time, due to the effect lower global commodity prices have had on industrial input costs. China's Producer Price Index dropped 3.4% on year in April, the lowest level of deflation in 16 months and compared with March's 4.3% plunge. Chinese producer prices have been deflationary for four years now. China's manufacturing PMI data also suggest there has been less deflationary pressure on factories in recent months. The Caixin-Markit China manufacturing PMI showed that input costs rose at the quickest pace since January 2013 last month, which in turn boosted the fastest increase in output charges since October 2011.
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