China's consumer price index (CPI), a main gauge of inflation, rose one percent year on year in March, official data showed on Friday.

Core CPI, which excludes food and energy prices, increased 1.1 percent, according to data released by the National Bureau of Statistics (NBS), versus a 1.8 percent rise ⁠in February.

China has capped domestic fuel price hikes to cushion the blow of surging oil prices due to the Middle East war.

On a month-on-month basis, CPI fell 0.7 percent in March, the data revealed.

The emergence of largely imported price pressures comes at a delicate time for an economy that remains fragile at home and increasingly exposed to weakening external demand.

Domestic car sales fell for a sixth straight month in March, as rising fuel prices dampened demand for petrol-powered models while electric vehicle sales continued to feel the impact of reduced incentives.

The trend underscores a growing dilemma for policymakers.

While the central bank has signalled scope for further easing to support growth, firmer headline inflation could limit aggressive monetary stimulus if pressures spread beyond energy and upstream industries.

China needs to juggle rising inflation with growth risks, a central bank adviser said in late March.

Friday's data also showed that the producer price index, which measures costs for goods at the factory gate, returned to year-on-year growth in March, ending a 41-month streak of decline.

The PPI rose 0.5 percent in March, reversing a 0.9 percent drop in February.

NBS statistician Dong Lijuan attributed the turnaround mainly to imported inflationary pressures and improved supply-demand dynamics in some domestic industries.

Economists warned that a move to inflation – driven by the Middle East conflict feeding cost pressures into the world’s second-largest economy rather than stronger demand – could complicate policy decisions, crimping growth and limiting scope for stimulus.

Producer prices surged ⁠in energy-intensive industries, with the non-ferrous metal mining and beneficiation sector ⁠recording a 36.4 percent jump last month ⁠and the non-ferrous metal smelting and rolling processing sector posting a 22.4 percent rise, as higher oil prices pushed up factory-gate costs.

Imported inflation leaves firms ⁠with little buffer if they are unable to pass on higher input costs, squeezing margins, investment and hiring, economists said. (Reuters/Xinhua)



Edited by Tony Sabine