China’s consumer deflation extended for a third month in April as punitive tariffs imposed by the US add to a drag on prices from weak domestic demand.
The consumer price index fell 0.1% from a year earlier, the National Bureau of Statistics said Saturday, similar to the drop in the previous month. It also matched the median forecast of economists surveyed by Bloomberg.
Factory deflation persisted for a 31st month, with the producer price index recording a decline of 2.7% compared to 2.5% in March.
Deflationary pressures are likely to linger and possibly get worse after President Donald Trump took aim at most Chinese exports with a 145% tariff in early April, provoking Beijing to retaliate in kind. The trade war could encourage some companies to offload their products at home, exacerbating already-fierce competition that may push firms to lower prices even further.
“Policy efforts to boost consumption since the fourth quarter of last year still appear to be failing to get much traction,” David Qu, an economist with Bloomberg Economics, wrote in a note on Saturday. “The key will be for the government to increase fiscal support quickly — especially if negotiations with the US fail to bring material relief on tariffs.”
Losses in jobs and incomes due to US tariffs may also weaken the ability and willingness of Chinese consumers to spend, likely prompting manufacturers and service providers to cut prices.
The economy continued to suffer from deflation in the first first three months of the year, reflecting an imbalance between supply and demand. The GDP deflator — a broad measure of prices across the economy — declined for the eighth consecutive quarter, the longest streak since the quarterly data began in 1993.
Chinese policymakers announced a slew of measures earlier this week to prop up the sputtering economy, cutting the policy rate and lowering the amount of cash lenders must keep in reserve. China and the US are also heading for their first trade talks since Trump took office this year, potentially paving the way for a reduction in tariffs.
Written by: Bloomberg News @Bloomberg
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