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People’s Bank of China Building Tuesday, April 18, 2023 China’s economy has grown at its fastest pace in a year, with Beijing on track to meet its growth targets for the year. By adding core stimulus, it will also help prevent the global economy from going downhill. Source: Bloomberg

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China’s consumer price index rose 0.1% in April, the slowest since early 2021.

Economists polled by Reuters expected consumer prices to rise 0.4% from a year earlier and remain unchanged from last month.

The April reading comes after China’s inflation eased to 0.7% in March after confirming a peak of 2.8% in September.

Inflation in China was led by food and services, according to the National Bureau of Statistics – food prices increased by 0.4% and service prices increased by 1% from a year ago. Meanwhile, consumer prices fell by 0.4 percent.

The offshore Chinese yuan weakened 0.04% to 6.9428 against the US dollar.

China’s producer price index, which measures prices paid by wholesalers, fell 3.6 percent. Economists polled by Reuters had expected a 3.2 percent decline, after a 2.5 percent decline last month.

This is in stark contrast to the latest US inflation data, which showed that consumer prices rose 4.9% in April – an understatement in the Federal Reserve’s 10th straight year of keeping inflation at a pedestrian pace.

Inflation in China has moderated sharply following the reopening, prompting market watchers to question whether the world’s second-largest economy is heading for deflation, BOFA’s chief China economist Helen Qiao wrote in a note on Tuesday.

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“Major central banks seem to be struggling to tame the inflationary beast [People’s Bank of China] “It used to be rated high on the scorecard to control inflation,” she wrote.

Qiao added that China’s consumer inflation rate averaged 1.8 percent, close to the lowest 3-year average reading since 2003.

Now, China’s core CPI inflation rate is well below Japan’s level, BoA economists noted.

Although not at a low level, China’s low inflation is likely due to sufficient demand.

“Families are still cautious about spending on goods, especially for big-ticket items (white goods, automobiles, etc.) even though they saw strong tourism demand during the recent holiday season,” Qiao said in the note.

“A weak labor market as well as a slow recovery in the property market continue to weigh on consumer sentiment,” she wrote.

– CNBC’s Lim Hui Jie contributed to this report

This is breaking news. Please check back for updates.

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