China: CPI vs PPI: March 2020

In March 2020, China’s Consumer price index (CPI) grew by 4.3% y/y, less than expected, decelerating from 5.2% y/y in February. The Producer price index (PPI) fell further by 1.5% y/y, sharper than expected and signalling stronger deflation pressure due to the COVID-19 pandemic. In February, the drop was only 0.4% y/y.

The rising CPI was mainly driven by higher meat prices. The pork, beef and lamb prices increased by 116% y/y, 21% and 12% y/y, respectively, in March 2020. Consequently, the food prices rose by 18.3% y/y, compared to a 21.9% y/y rise in February 2020. The core CPI inflation, which excludes food and energy prices, inched up to 1.2% y/y from 1.0% y/y in February. Although the March CPI was still above the 3% y/y annual target, there was a deceleration of CPI due to food transportation gradually going back to normal in March. 

The decreasing PPI was mainly caused by the weaker external demand as the pandemic intensified around the world in March 2020. The producer goods PPI dropped further by 2.4% y/y, compared to a drop of 1% y/y in February. The consumer goods PPI decelerated to 1.2% y/y from a 1.4% y/y rise in February. 

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