BEIJING - Despite stabilizing consumer inflation and narrowed producer deflation in March, the world's second largest economy may need further loosening measures, economists said.
China's consumer price index (CPI), the main gauge of inflation, grew 1.4 percent year on year in March, the National Bureau of Statistics (NBS) said on Friday. The reading remained the same as in February, when it rebounded from January's 5-year low of 0.8 percent.
The CPI reading beat market expectations, and the drop in the producer price index (PPI), a measure of costs for goods at the factory gate, also narrowed from February's 4.8 percent decline to 4.6 percent.
The readings came as a relief to China's economy, which is experiencing a slowdown from its previous double-digit growth amid persistent deflationary pressure.
Producer prices have slid for the 37th straight month. The PPI started a downward trend in March 2012 and has yet to turn around. The 4.8-percent decline was its largest drop since 2012.
On a monthly basis, consumer prices in March edged down 0.5 percent from February, and producer prices contracted 0.1 percent, narrowing from a 0.7 percent decline in February.
NBS statistician Yu Qiumei attributed the monthly consumer price drop to declining prices after the Chinese Lunar New Year holiday.
Food demand retreated after the holiday, vegetables are in rich supply due to seasonal factors and prices of services dropped as many workers returned to their jobs after the holiday, Yu said.
The narrowing producer price drop can be mainly attributed to declines in oil and natural gas prices which declined by 15.7 percent month on month in February but increased 5.4 percent in March, according to Yu.
Despite stabilizing inflation in general, economists said deflationary risks remain due to the continuous plunge in factory gate prices and low consumer prices, which might presage more monetary easing policies in the coming months.
As March CPI was "in line with our forecast," and PPI came in better than expected, adding that the data show few signs of new inflationary pressure, Julia Wang, Greater China Economist of HSBC, said in a note.
However, the CPI in the first quarter averaged 1.2 percent, the lowest since the fourth quarter of 2009. "We maintain our call for more monetary easing in the coming weeks," Wang said.
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