Consumer price inflation in China rises in March at its slowest pace since October 2019, as food and oil price rises almost disappear and coronavirus-related blockades continue to hit demand.

China’s Consumer Price Index (CPI) rose by 4.3% in March from a year earlier, the National Statistics Bureau said. The index growth is less than the expected increase of 4.9% according to the average estimate of surveyed economists.

Production prices are down by 1.5% at the same time, while the forecasts were for a 1.1% decline.

In March, business in the world’s second-largest economy gradually began to resume operations following serious measures taken by the authorities to curb the spread of COVID-19, with restrictions on the supply of some foodstuffs loosened as global oil prices continued to fall. This mitigates to some extent the effect on households, which have been hit both by rising prices and increased unemployment, and eases the task of the authorities and the central bank of the country seeking to loosen monetary policy.

Satisfactory market supply has lowered prices for eggs, seafood, and fruit, while a fall in oil prices in the month lowered the price of diesel and gasoline, the statistics bureau said. Airfare prices fell by 28.5% due to a collapse in travel demand during the blockade.

Although food and commodities helped to lower inflation in China, the main price pressure remained subdued. Core inflation, which excludes more volatile food and energy prices, accelerated to 1.2% from a year earlier, after reaching 1.0% in February. However, core inflation has fallen since February.

Overall, demand in China declined in February and March, when the country was hit hardest by the coronavirus, and now it is recovering after the virus has been seized. However, the worldwide spread of the epidemic will hurt demand in other countries, affecting Chinese exports accordingly.

Production prices are already deflating and prospects are deteriorating, which will affect producers’ financial performance and their ability to cover both employee salaries and debts.

“The economy is currently suffering from a massive decline in food prices to various services due to the coronavirus epidemic”, said the economists at the Shanghai branch of Australia and New Zealand Banking Group. “Factories will be hit hard by declining production prices”, added they.