April 9, China's Producer Price Index (PPI), a main gauge of inflation at the wholesale level, fell 0.3 percent in March from a year earlier, indicating a sluggish domestic economic situation.

It is the first time for the PPI to see negative year-on-year growth since December 2009, and the growth was the lowest in 27 months, the National Bureau of Statistics (NBS) said on Monday.

Economists said the low reading of March’s PPI was mainly due to a high base figure over the same period last year, but also indicated an oversupply of industrial goods.

Qu Hongbin, HSBC chief economist for China, said the new order index of the Purchasing Managers’ Index in March fell to the lowest level in 4 months, showing waning domestic demand weighed on economic growth.

Li Daxiao, director of Ying Da Securities' research department, said the first negative growth of the PPI in 3 years was a result of sluggish demand in the real economy, with less production activities and slower industrial growth.

According to a report by Nomura Securities, the negative growth of the PPI showed that China’s industries are still in an intense adjustment period and are not likely to rebound in the short term.

If there is no significant improvement in investment and no surge in international oil prices, China’s PPI may continue to see negative growth, the brokerage firm said.