The Beijing News:

We have noticed that the CPI has been positive for two consecutive months, but in March the growth rate significantly narrowed, only rising by 0.1%, which is lower than external expectations. What are the reasons for this? What are the predictions for future trends in CPI? Thank you.

Sheng Laiyun:

Thank you for your questions. We are very concerned with changes in market prices. First, the CPI in March, as you just mentioned, decreased by 1% month on month and increased by 0.1% year on year, with the increase dropping by 0.6 percentage point compared to the previous month. This is mainly due to seasonal price declines after the Spring Festival, with significant drops in food prices and prices of services such as tourism. After the Spring Festival, the weather has warmed up and major agricultural products are in ample supply, leading to a 3.2% decrease in March's food prices. That led to a fluctuation of nearly 0.6 percentage point in CPI month on month. After the Spring Festival, tourism prices, including airfare, significantly decreased, driving down prices for non-food items. According to estimates, the decrease in non-food prices resulted in a 0.37 percentage point month-on-month decrease in March's CPI. The seasonal decline in food and non-food prices after the Spring Festival caused a significant month-on-month decrease in CPI during the month of March.

Second, despite a month-on-month decrease in March, the CPI showed overall stability in terms of quarterly performance. The core CPI, excluding energy and food prices, was 0.7% in the first quarter, which was essentially the same as the fourth quarter of last year. The CPI stayed negative for three consecutive months in the fourth quarter of last year, with the average CPI for the fourth quarter down by 0.3% year on year. However, in the first quarter of this year, the CPI remained unchanged from a year earlier, and increased by 0.3 percentage point compared to the fourth quarter of last year. This was consistent with the momentum of economic recovery.

Third, CPI fluctuations in the first quarter were due to distinct structural and temporal factors. Among the eight major categories in the consumer price index, food prices were down by 3.2%, and transportation and communication decreased by 1.4%, according to the newly released data. Prices for other categories, including clothing, housing, education, culture and recreation, as well as other goods and services, all witnessed increases. Particularly, prices for education, culture and recreation, as well as clothing prices, even increased by more than 1.5 percentage points. Considering both monthly and quarterly figures, the changes in the consumer price index demonstrate distinct structural characteristics. 

Lastly, regarding the future trend, we believe that the CPI is expected to recover slowly. As the economy sustains positive momentum, we will see increasing demand, which serves as an important fundamental factor to support the recovery of the CPI. Moreover, agricultural products such as hogs are also seeing a turning point in price adjustment. Consumption during upcoming holidays, such as the Labor Day holiday, will continue to drive consumer price recovery for travel-related items. In addition, there are other factors that can boost demand, hence having impacts on consumer prices. Overall, the CPI is expected to witness gradual recovery from a low level. Thank you.