BEIJING: China’s consumer price inflation fell below one percent in March, official figures showed Tuesday, a sign of weak demand as the world’s second largest economy tries to recover from its pandemic-driven slump.

The March consumer price index (CPI) – the main gauge of inflation – came in at 0.7 percent, down from the one percent seen a month earlier, according to the country’s National Bureau of Statistics (NBS).

Beijing is targeting an average inflation rate of three percent for 2023, which is still far below the current rates of many developed economies.

Analysts had expected a faster pace in March, with economic activity picking up again after the abandonment of zero-Covid restrictions at the end of 2022.

The producer price index (PPI), which measures the cost of goods leaving factories, shrank for the sixth consecutive month, with prices falling 2.5 percent – indicating lower margins for businesses.

“Economic recovery is on track but not strong enough to push up prices,” Zhiwei Zhang of Pinpoint Asset Management wrote in a note.

“This suggests the economy is still running below its potential,” he added, suggesting the data made an interest rate cut more likely.

Fresh fruit prices rose 11.5 percent year-on-year, and pork, the most consumed meat in the country, jumped 9.6 percent.

The cost of fuel for transport fell 6.4 percent.

Globally, commodity and food prices are rising, though China has remained relatively unscathed by increases linked to the war in Ukraine.

“We think consumer price inflation will rebound in the coming months as the labour market tightens again,” analysts from Capital Economics said in a note.

“But it will be well below the government’s ceiling of around three percent, and the increase in inflation will be far smaller than what was seen elsewhere when they opened up.”

China is targeting five percent economic growth this year, one of the lowest targets in decades, but Premier Li Qiang warned last month even this could be difficult to achieve.