China Consumer Prices Remain Flat; PPI Falls Most Since 2015

Reflecting weak domestic demand, China consumer prices remained flat in June and producer prices fell the most since December 2015, leaving the door open for more monetary policy easing.

Consumer prices remained unchanged in June from a year ago, following a 0.2 percent rise in May, the National Bureau of Statistics said Monday. Prices were expected to climb again by 0.2 percent.

This was the lowest rate since February 2021. Beijing targets to keep inflation at around 3 percent in the whole year.

Inflation is likely to rise gradually later this year, but the upside will be limited, leaving room for further policy easing, Capital Economics’ economist Zichun Huang said.

On a monthly basis, consumer prices dropped 0.2 percent, while prices were expected to show no change.

Core inflation, which excludes prices of food and energy, slowed to 0.4 percent from 0.6 percent in the previous month, data showed.

Food prices increased at a pace of 2.3 percent annually, following a 1.0 percent rise in May. Prices for pork, the staple meat in China, declined 7.2 percent from last year. Non-food prices decreased 0.6 percent after staying flat.

Another data from the NBS showed that producer prices declined 5.4 percent on a yearly basis, sharper than the 4.6 percent decrease in May and economists’ forecast of 5.0 percent fall. This was the biggest decline since December 2015.

Capital Economics’ economist said with credit demand weak, and the currency under pressure, the bulk of support will come through fiscal policy. The economist expects only another 10 basis point of policy rate cuts this year.

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