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China’s factory deflation deepens as pandemic hits demand

Data released last week showed China’s exports unexpectedly grew in April from a year earlier, although a sharper-than-expected decline in imports signalled weak domestic demand.

By: Reuters | Beijing | Published: May 12, 2020 8:49:36 am
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China’s factory prices fell at the sharpest rate in four years in April, highlighting weakening industrial demand in the world’s second-largest economy as the coronavirus pandemic slams global growth.

The producer price index (PPI) fell 3.1% from a year earlier, the National Bureau of Statistics said in a statement on Tuesday, compared with a 2.6% drop tipped by a Reuters poll of analysts and a 1.5% decline in March.

Data released last week showed China’s exports unexpectedly grew in April from a year earlier, although a sharper-than-expected decline in imports signalled weak domestic demand.

China is trying to recover from its first economic contraction on record during the January-March quarter, when the economy was paralysed by curbs to slow the spread of the virus that has killed more than 4,600 people in the mainland. But the spread of the virus beyond China now threatens to push the global economy into a deep recession.

Chinese factories have been hit by a plunge in overseas orders and face rising inventories and falling profits, while many have let workers go to cut costs.

As China’s central bank ramped up economic support, banks extended 1.7 trillion yuan ($240.05 billion) in new yuan loans in April, significantly more than a year earlier, while growth of broad money supply also quickened.

Meanwhile, China’s consumer price index (CPI) rose 3.3% from a year earlier, slower than a 3.7% rise tipped by a Reuters poll of analysts and a 4.3% increase in March.

That was largely due to slowing food price growth, which rose over 18% in March. But it still rose 14.8% last month, led by a 96.9% jump in pork prices. Non-food prices rose 0.4% in April, the data showed.

Core inflation – which excludes food and energy prices – remained benign last month at 1.1%,down from 1.2% in March.

Analysts expect further monetary easing soon, although Beijing is likely to rely on fiscal stimulus to cushion growth.

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