China's consumer inflation rose in March in line with expectations, posting the biggest annual increase since October last year. The Chinese Statistics Department released data on consumer inflation (CPI) which was recorded to rise to 2.3% YoY in March. This figure was in line with previous market expectations, and was higher than the February release of 1.5% YoY. 

China's CPI increase this time is also the fastest year-over-year increase since October 2018. At the same time, the relevant Department also released China's producer inflation (PPI) which rose 0.4 percent year on year in March. Just like the CPI release, this report is in line with economists' forecasts before, and better than the 0.1% YoY increase during the February period.

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Keep in mind, China's economy in recent times has been highlighted by market players, because there are signs of damage triggered by months of trade wars with the United States. The slowdown in China's economic activity has forced the government of the Bamboo Curtain country to intervene to reduce further slowdown. As a result, several other releases of Chinese economic data recorded a rebound, such as the CPI and PPI data above, as well as Manufacturing PMI returning to the expansion path. For the 2020 projection, the IMF chooses to reduce China's economic growth estimates from 6.2 percent to 6.1 percent.

IMF Raises 2019 China Economic Growth Forecast

From a separate report, the International Monetary Fund (IMF) recently upgraded its economic growth forecast for China in 2019. The IMF did this after seeing efforts by the Chinese Government to support the economy, and progress in talks with the US in an effort to end trade wars.

In the release of its latest World Economic Outlook, the IMF revealed that China's economy is projected to grow 6.3 percent in 2019, higher than the previous forecast of 6.2 percent. Nonetheless, the market views that China's economy remains slowing compared to 6.6 percent growth last year, when China's economy recorded its worst performance in the past 28 years. "China has increased fiscal stimulus to reduce the impact of trade wars. Meanwhile, overall, the Chinese economy will remain soft because there are many downside risks. The possibility of China's growth will surprise on the downside," said IMF economic adviser Gita Gopinath, in a report he wrote.

China Services PMI Rises to 14-Month High Level

China's Caixin version of the service sector rose significantly in March, touching the highest level since January 2019. This marked the positive impact of the Chinese government's stimulus. According to a survey conducted by Caixin, an institution focused on small and medium-sized companies, service activity in China increased significantly and rose to a 14-month high in March, due to increased domestic and foreign demand. This report drives risk assets, including the strengthening of commodity currencies in the Asian session

In March 2019, the Caixin version of China's services PMI rose to 54.4, which is the highest level since January 2018. This number outperformed expectations at level 52.3, and the previous period's data reached only 51.1. Today's surge in Bamboo Curtain's non-manufacturing activities today, seems to complement the positive release of China's Manufacturing PMI data which is returning to expansion.

Signs of The Chinese Economy Back to Stability

China's fundamental data rebounded quite convincingly in recent days, indicating that the impact of the stimulus disbursed by the Chinese Government began to emerge. However, observers do not want to be too confident with the signal of recovery that is still considered premature.

"In general, Chinese fundamentals recovered in March, with increases in the domestic and foreign sectors as well as increased employment in manufacturing. But business sentiment still looks cautious and the inflation trend is still weak. (Still) More evidence is needed to believe China's economy has stabilized, "said Zhengsheng Zhong, Director of Macroeconomic Analysis at CEBM Group.