BEIJING (Reuters) -China’s consumer prices fell for the second straight month in March while producer deflation persisted, as caution grows over the economic outlook amid mounting tariff risks.
The economy is off to an uneven start this year. A nascent pick-up in retail sales and robust expansion in factory activity have been countered by rising unemployment and deflationary pressures, fuelling calls for more stimulus amid a worsening global trade war.
The consumer price index dropped 0.1% last month from a year earlier, National Bureau of Statistics data showed on Thursday. That was slower than February’s 0.7% decline but missed a Reuters poll forecast for prices to remain flat.
CPI fell 0.4% month-on-month, against a 0.2% fall in February and missing an estimated 0.3% decline.
Core inflation, excluding volatile food and fuel prices, edged up 0.5% in March from a year earlier, reversing a 0.1% fall in June.
Consumption has been in focus this year with the net export contribution to growth projected to turn negative as Beijing imposes countermeasures against U.S. tariffs, putting China’s GDP growth target of around 5% to the test.
“We expect fiscal policies to lead domestic demand expansion amid external shocks,” Citi economists said, forecasting additional funding of 1 trillion yuan ($136.06 billion) to 1.5 trillion yuan mid-year.
They see “options of expansion in trade-in subsidies, childcare subsidies and support for low-income households all on the table.”
Last month, China’s financial regulator told lenders to relax consumer credit quotas and loan terms to support consumption.
The producer price index declined 2.5% in March from a year earlier, deepening the 2.2% fall in February, the weakest in four months and below the expected 2.3% drop.
($1 = 7.3499 Chinese yuan)
(Reporting by Qiaoyi Li and Ryan Woo; Editing by Sam Holmes)
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