China June Consumer Inflation Misses Forecasts Amid Anaemic Demand

 

  • China's consumer prices grew for a fifth month in June but missed expectations, while producer price deflation persisted, with domestic demand mired on a slow recovery track despite support measures for the world's second-largest economy.
  • Beijing has sought to revive consumption after a stuttering post-COVID recovery, but concerns are lingering over more fundamental issues including a protracted housing downturn and job insecurity. That has dented consumer and industrial activity and reinforced calls for more effective policies.
  • The consumer price index (CPI) in June rose 0.2% from a year earlier, against a 0.3% uptick in May, the slowest in three months, data from the National Bureau of Statistics showed on Wednesday, below a 0.4% increase forecast in a Reuters poll. "The risk of deflation has not faded in China. Domestic demand remains weak," said Zhiwei Zhang, chief economist at Pinpoint Asset Management.
  • Food prices fell even more, despite supply disruptions caused by bad summer weather, underlining the soft demand. Food prices slipped 2.1% year-on-year, compared with a 2% decline in May. Notably, fresh vegetable prices tumbled 7.3% versus a rise of 2.3% in May. A decline in fresh fruit prices deepened to 8.7% from 6.7% in May.
  • CPI edged down 0.2% month-on-month, versus a 0.1% drop in May and worsening from an expected 0.1% fall. The producer price index (PPI) fell 0.8% in June from a year earlier, less than a 1.4% decline the previous month, and matched a forecast 0.8% fall.
  • The fall in the PPI was the smallest in 17 months, mostly attributable to a lower base last year. "The deepening declines in factory-gate prices of consumer durables underscores that excess manufacturing capacity remains a worsening issue," said Gabriel Ng, assistant economist at Capital Economics.
  • "Government policy is still prioritizing investment, which is set to exacerbate the problem further. This will continue to weigh on inflation," said Ng, who estimated full-year CPI would rise just 0.5%, well below an official inflation target of 3% for 2024.

(Source: Reuters)