Inflation decreases in May, CPI and PPI show
- Economists polled by Reuters expected China’s consumer price index to rise 0.3% year-on-year, after hitting a two-year low of 0.1% in April. Month-on-month, economists predicted a decline of 0.1 percent.
- Recent economic data pointed to a disappointing recovery from China’s strict Covid lockdown measures as the economy struggles with softer demand and falling exports.
People walk past buildings in Shanghai, Shanghai, China, Friday 21 April 2023.
Bloomberg | Bloomberg | Getty Images
Inflation in China remained at low levels in May as the economy struggles to recover from the lifting of strict Covid measures late last year.
The producer price index in May fell 4.6%, compared with a 3.6% decline in April. A Reuters poll showed economists expected to see a 4.3% decline in producer prices.
The reading marked the steepest year-on-year drop in seven years, as producer prices saw a 7.2% year-on-year drop in May 2016.
China’s consumer price index in May rose 0.2% from a year ago, government data showed. Economists surveyed by Reuters expected an increase of 0.3 percent. The CPI in April was at a two-year low of 0.1%.
Month-on-month, prices fell 0.2% – economists had forecast a 0.1% decline.
China’s low consumer inflation and producer price deflation contrast with relatively high inflation in major economies around the world.
Global central banks, including the US Federal Reserve, have been struggling to bring down rising rates for more than a year. Just this week, Canada and Australia defied expectations and raised interest rates.
After the release, the onshore Chinese yuan weakened 0.06% to 7.1154 against the US dollar. The CSI 300 index, which tracks the largest listed companies in Shanghai and Shenzhen, fell 0.2% and last traded slightly above flatline.
The latest data is among a number of economic indicators pointing to a cooling economy in China.
Pinpoint Asset Management’s Zhiwei Zhang said: “The risk of deflation continues to weigh on the economy. Recent economic indicators are sending consistent signals that the economy is cooling.”
Zhang expects the Chinese government’s next fiscal policy review to take place after the second-quarter gross domestic product is released next month.
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