China Consumer Price Growth Eases, Reflecting Caution on the Economy

March’s reading was weaker than the 1.0% annual rate recorded in February and the 0.9% rate expected by economists polled by The Wall Street Journal.

The figures suggest the lifting of Covid controls in China isn’t generating the kind of broad price pressures that propelled inflation sharply higher in the U.S. and other major economies as growth revved up after the worst of the pandemic passed.

Part of the reason is weakness in the labor market, which tends to keep a lid on price growth. Unemployment in China is stubbornly high—especially among young people—with just over 18% of those aged 16 to 24 out of work in February.

But it might also suggest that domestic spending isn’t yet delivering as potent a revival as was hoped. While signals from business surveys, cinema box-office receipts and traffic and public transit data suggest China’s economy bounced back in the first quarter of the year as consumers flocked back to stores and restaurants, other data imply consumers are wary about spending on cars and other big-ticket items while continuing to sock away cash rather than run down savings.

The slowdown in inflation, said Ting Lu, chief China economist at Nomura in Hong Kong, “suggests post-Covid recovery momentum remains weak.”

Official data on first-quarter growth in China is due to be published Tuesday. Economists expect an expansion of around 4% compared with a year earlier, according to a Wall Street Journal poll of 17 economists. The government has set a target of around 5% growth for the year as a whole.

Economists say the real test for growth will come later in the year when the immediate boost to spending from Beijing’s abrupt December decision to dismantle Covid controls fades. Already, other engines of Chinese growth are sputtering. Exports are sinking as rising interest rates pinch Western consumers and businesses, while real estate construction has collapsed after a long boom and attempts by policy makers to rein in debt.

Still, in contrast to Western economies, weakening inflation means the People’s Bank of China should have more space to support economic recovery with easy money policies.

“The likelihood of a PBOC rate cut is rising,” said

Zhiwei Zhang,

an economist at Pinpoint Asset Management.

Tuesday’s data showed the slowdown in inflation was driven by weaker food-price inflation, with prices for vegetables tumbling 11.1% from a year earlier. Nonfood inflation also slowed.

Prices charged by producers at the factory gate, meantime, fell 2.5% from a year earlier, another sign that inflationary pressures in China are weak. That was a steeper fall than the 1.4% decline recorded in February.

—Grace Zhu contributed to this article.

Write to Jason Douglas at jason.douglas@wsj.com

March’s reading was weaker than the 1.0% annual rate recorded in February and the 0.9% rate expected by economists polled by The Wall Street Journal.

The figures suggest the lifting of Covid controls in China isn’t generating the kind of broad price pressures that propelled inflation sharply higher in the U.S. and other major economies as growth revved up after the worst of the pandemic passed.

Part of the reason is weakness in the labor market, which tends to keep a lid on price growth. Unemployment in China is stubbornly high—especially among young people—with just over 18% of those aged 16 to 24 out of work in February.

But it might also suggest that domestic spending isn’t yet delivering as potent a revival as was hoped. While signals from business surveys, cinema box-office receipts and traffic and public transit data suggest China’s economy bounced back in the first quarter of the year as consumers flocked back to stores and restaurants, other data imply consumers are wary about spending on cars and other big-ticket items while continuing to sock away cash rather than run down savings.

The slowdown in inflation, said Ting Lu, chief China economist at Nomura in Hong Kong, “suggests post-Covid recovery momentum remains weak.”

Official data on first-quarter growth in China is due to be published Tuesday. Economists expect an expansion of around 4% compared with a year earlier, according to a Wall Street Journal poll of 17 economists. The government has set a target of around 5% growth for the year as a whole.

Economists say the real test for growth will come later in the year when the immediate boost to spending from Beijing’s abrupt December decision to dismantle Covid controls fades. Already, other engines of Chinese growth are sputtering. Exports are sinking as rising interest rates pinch Western consumers and businesses, while real estate construction has collapsed after a long boom and attempts by policy makers to rein in debt.

Still, in contrast to Western economies, weakening inflation means the People’s Bank of China should have more space to support economic recovery with easy money policies.

“The likelihood of a PBOC rate cut is rising,” said

Zhiwei Zhang,

an economist at Pinpoint Asset Management.

Tuesday’s data showed the slowdown in inflation was driven by weaker food-price inflation, with prices for vegetables tumbling 11.1% from a year earlier. Nonfood inflation also slowed.

Prices charged by producers at the factory gate, meantime, fell 2.5% from a year earlier, another sign that inflationary pressures in China are weak. That was a steeper fall than the 1.4% decline recorded in February.

—Grace Zhu contributed to this article.

Write to Jason Douglas at jason.douglas@wsj.com