The producer price uptick offers a policy window: if reinforced by household demand and expectations, it could kick off a broader recovery
China may finally have a chance to loosen the grip of deflation. Yet, the more important question is whether it can do so without making households feel poorer first.
But last month’s purchasing managers’ index (PMI) suggests a rockier path than some might expect – and why the policy window should not be wasted.
Manufacturing remained in expansion with the official April PMI at 50.3, but non-manufacturing activity returned to contraction at 49.4, with services at 49.6 and construction at 48.0. While the index for raw material purchase prices remained elevated at 63.7, the factory-gate price index stood at 55.1. This means price pressure is returning ahead of demand, profits and household confidence.
This is why this moment matters. If the producer price uptick can be reinforced by stronger household demand and firmer expectations, this could mark the start of a broader recovery. Otherwise, China risks a more fragile outcome, where rising cost pressure is not matched by consumption strength, with a price rebound that weakens confidence rather than restoring it.
Source: News - South China Morning Post
