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Did China’s Consumer and Producer Prices Rise in April?

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China’s CPI data

In April, China’s CPI (consumer price index) rose 2.3% YoY (year-over-year)—the same as in the previous two months. The rise in consumer inflation was mainly due to higher food prices, particularly pork. Food prices rose 7.4% YoY, while nonfood prices edged up 1.1% in April. Pork prices rose sharply by 33.5% YoY and accounted for 0.8% of CPI growth, while vegetable prices jumped 22.6% and accounted 0.7% of CPI growth.

From January to April, consumer prices rose 2.2% compared to the same period in 2015. Meanwhile, consumer prices decreased 0.2% month-over-month in April.

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China’s PPI data

The PPI (producer price index) for manufactured goods fell 3.4% YoY in April.
The decline was lower than the 4.3% YoY drop in March due to stability in commodity prices and recovery in the construction sector. April marked the 50th straight month in which the PPI fell as China’s economic slowdown and industrial overcapacity weighed on prices.

On a month-over-month basis, the PPI increased 0.7% in April, while from January to April, the PPI decreased 4.5% YoY.

With the recent rise in the prices of commodities such as oil and steel and the expected stimulus from the Chinese monetary authority, the PPI may improve in coming months. The Chinese government has already stepped up its policy support to boost the property market and infrastructure construction.

However, it has been argued that signs of improvement in both consumer and producer prices may be short-lived.

Impact on mutual funds

Modest readings of CPI and PPI data in April indicate that China’s economy is on slightly firmer ground and the risk of deflation is a little lower. Thus, 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 above-mentioned mutual funds invest in companies like Jumei International Holding (JMEI), Qunar Cayman Islands (QUNR), Ctrip.com International (CTRP), NetEase (NTES), and JD.com (JD).

Investors can gain exposure to Chinese stocks through ETFs such as the iShares MSCI China ETF (MCHI) and the Deutsche X-trackers Harvest CSI 300 China A-Shares ETF (ASHR).

In the next article in this series, we’ll look at China’s foreign reserve data.

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