(Yicai) April 10 -- China’s consumer prices declined at a slower rate last month, thanks to government policies aimed at boosting consumption.

The consumer price index dipped 0.1 percent year on year in March, remaining in negative territory for a second straight month, according to data released by the National Bureau of Statistics today. Chief economists surveyed by Yicai had expected it to inch 0.09 percent lower.

The rate of decline eased from the 0.7 percent drop recorded in February, when consumer prices fell for the first time in 13 months due to softer demand following the Chinese New Year holiday. 

The core CPI, which excludes food and energy prices, rose 0.5 percent in March, reversing a 0.1 percent dip the month before.

Food prices fell 1.4 percent, compared with a 3.3 percent drop in February, easing the decline in the CPI by around 0.35 percentage point, said NBS statistician Dong Lijuan. Service prices edged up 0.3 percent, rebounding from February's 0.4 percent slide, giving a 0.13 point lift to the index, Dong added.

Additionally, the rollout of a new round of government subsidies for replacing consumer goods led to price gains in March for household appliances, gold jewelry, and clothing, the price of which rose 2.8 percent, 2.3 percent, and 0.7 percent, respectively, from the previous month. The increases were all higher than the average levels for the same period in the past decade, Dong noted.

Producer Price Drop

China’s factory-gate prices fell for the 30th consecutive month and by the most since last November, according to the NBS data. The producer price index dropped 2.5 percent in March from a year ago, compared with a 2.2 percent decline in the prior month. Chief economists had predicted a decline of 2.21 percent for March.

The downward trend was largely influenced by seasonal factors and falling international commodity prices, the NBS noted.

Due to declining international crude oil prices, the oil and gas extraction sector saw prices sink 4.4 percent month on month, while refined petroleum product prices waned 1.7 percent.

Export-oriented sectors also showed weakness. Prices in the computer, communication, and other electronic equipment manufacturing sector slid 0.7 percent from February, while automobile manufacturing prices fell 0.4 percent, Dong said.

The annual decline in factory-gate prices could widen to around 3.5 percent this month, according to Wang Qing, chief macroeconomic analyst at Golden Credit Rating International. Changes in the external economic and trade environment are likely to slow exports, exerting further downward pressure on China’s industrial product prices, Wang predicted. 

Whether the PPI can return to growth this year will depend on the effectiveness of counter-cyclical policy adjustments, particularly those aimed at supporting the real estate sector, Wang concluded.

Editors: Dou Shicong, Emmi Laine