China Consumer Prices Fall For Second Month

(RTTNews) - China consumer prices declined for the second consecutive month in March amid trade tariffs set to increase supply and exacerbate downward pressure on prices.

Consumer prices dropped unexpectedly by 0.1 percent on a yearly basis, following the 0.7 percent fall in February, the National Bureau of Statistics reported Thursday. Prices were expected to remain flat in March.

Core inflation that excludes prices of food and energy came in at 0.5 percent. This has reversed a 0.1 percent fall in February.

Driven by ample supply, food prices fell 1.4 percent from the last year. On the other hand, non-food prices grew 0.2 percent in March. In the first quarter, consumer prices edged down 0.1 percent from the same period last year.

Month-on-month, consumer prices slid 0.4 percent in March, which was double the expected rate of fall of 0.2 percent.

It seems unlikely that consumption support will be sufficient to fully offset weaker exports, Capital Economics economist Julian Evans-Pritchard said. As such, overcapacity looks set to worsen, exacerbating downward pressure on prices, the economist noted.

Another data from the NBS showed that producer prices declined 2.5 percent year-on-year in March, worse than economists' forecast of 2.3 percent fall and February's 2.2 percent decrease.

Capital Economics' economist said producer prices are set to soften further given the recent falls in commodity prices and the incoming hit to exports, which will encourage some manufacturers to cut prices.