China’s consumer price index
In March, China’s CPI (consumer price index) rose by 2.5% YoY (year-over-year), the same growth seen the month prior. This was mainly due to higher food prices. While food prices soared 7.6% YoY, non-food inflation rose by 1% in March. Pork prices jumped sharply by 28.4% YoY, contributing to 0.64% of the CPI’s growth, and vegetable prices skyrocketed by 35.8%, accounting for 0.92% of the CPI’s growth. Meanwhile, consumer prices fell by 0.4% on a month-over-month basis in March.
China’s producer price index
The PPI (producer price index) for manufactured goods fell by 4.3% YoY in March. The decline was lower than the 4.9% YoY drop seen in February due to stability in commodity prices and recovery in the construction sector. It was the 49th straight month of decline, with China’s economic slowdown and industrial overcapacity weighing on prices.
The PPI increased 0.5% month-over-month in March, the first gain since 2014. Based on the average between January and March, the PPI decreased 4.8% YoY.
With the recent uptick in prices for commodities such as oil and steel and the expected stimulus from the Chinese monetary authority, the PPI may improve in the coming months. The Chinese government has already increased its policy support to boost the property market and infrastructure construction.
Impact on mutual funds
Modest CPI and PPI data in March indicates that China’s economy is on slightly firmer ground. Therefore, the performance of mutual funds such as the Clough China Fund – Class A (CHNAX), the Guinness Atkinson China and Hong Kong Fund (ICHKX), the Eaton Vance Greater China Growth Fund – Class A (EVCGX), and the John Hancock Greater China Opportunities Fund – Class A (JCOAX) could be positively affected.
The aforementioned mutual funds invest in companies such as Jumei International (JMEI), Qunar Cayman Islands (QUNR), Ctrip.com International (CTRP), NetEase (NTES), and JD.com (JD). In the next part of this series, we’ll analyze China’s industrial production data.