The prices of Beijing (Reuters) -china displayed the highest decline in six months in April while consumer prices dropped for a third month, highlighting the need for more stimulus while political decision -makers struggle with the economic report of a trade war with the United States.
A prolonged slowdown in the housing market, high household debt and employment insecurity have hampered investments and consumption expenditure, maintaining the life of life. Now the economy is also faced with growing external risks of trade barriers.
However, there are hopes for a de-escalation of tensions while the American-Chinese commercial talks start on Saturday in Switzerland.
The Price Price Index (PPI) fell 2.7% in April over the year, worse than a drop of 2.5% in March, but was less than the forecasts of economists for a fall of 2.8%, according to data from the National Statistics Bureau.
“China is still faced with persistent deflationary pressure,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management. “The pressure can increase in the coming months, exports will probably weaken.”
“Even if China and the United States can progress and reduce prices in commercial negotiations, it is unlikely that prices come back to the level before April,” added Zhang. “A more proactive fiscal policy is necessary to stimulate domestic demand and solve the deflation problem.”
Consumer prices decreased by 0.1% last month compared to the previous year, corresponding to a drop of 0.1% in March and forecasts in a Reuters survey.
The CPI increased by 0.1% per month against a drop of 0.4% in March and compared to forecasts of economists without a price change.
Basic inflation, excluding volatile prices for food and fuels, took place at 0.5% in April compared to the previous year, in accordance with the increase recorded in March.
The Chinese government implements a wide range of measures to stimulate consumption in different sectors and announced last week a series of stimulation measures, including interest rate reductions and a major liquidity injection.
While the trade war between the two largest economies in the world weighs on exports, the Chinese retail giants, including JD.com and Freshippo belonging to Alibaba, have initiated measures to help exporters to rotate on the domestic market. This could further depress prices as businesses and consumers remain moderate due to uncertain perspectives.
The world’s investment banks, including Goldman Sachs, lowered their GDP forecasts for China this year to the official objective of around 5%, attributing the damage to harmful trade war.
(Report by Qiaoyi Li, Sophie Yu and Ryan Woo; edition by Jacqueline Wong)
