China's CPI and PPI Weighed Down by Consumer Weakness and Global Pressures, UOB Group Reports

In a recent analysis by UOB Group’s economist Ho Woei Chen, China's consumer price index (CPI) and producer price index (PPI) are facing downward pressure attributed to weak consumer demand, lower international oil prices, and price pressures within the export industries. The forecast for 2025’s CPI has been lowered to 0% from a previous estimate of 0.9%, while the PPI forecast is now at -2.0%, down from -1.2%. The recent economic environment has been rife with challenges, especially in the wake of the US-China trade tensions which have seen retaliatory tariff hikes. These developments pose a risk of a more significant decoupling between the two powers, potentially impacting China's export and investment landscapes markedly. According to estimates, the application of these tariffs could detract as much as 2 percentage points from China’s GDP growth for the year if they remain in place. As China prepares to release key economic indicators and its first-quarter GDP estimates later this month, projections suggest steady GDP growth around 5.4% year-on-year, although overall growth forecasts may be revised downward in light of tariff impacts. Furthermore, anticipations are brewing that the People's Bank of China (PBOC) will spearhead monetary policy adjustments, possibly reducing the reserve requirement ratio (RRR) and decreasing key interest rates in an attempt to stabilize market conditions as the country navigates through this tumultuous economic landscape. While these measures may provide short-term relief, the question remains whether they will be enough to counteract the broader, more persistent inflationary pressures and global economic headwinds the country faces. This situation points to a complex interplay of domestic policy responses and international economic relations that will likely shape China’s economic trajectory in the coming years. Overall, while some signs of recovery are noted in core CPI metrics, the persistent decline in PPI indicates a troubling trend that could require more aggressive policy interventions moving forward.