by Andrew Mullen & Mia Nulimaimaiti in SCMP, July 10, 2023
Deflation risks in China heightened in June amid weak demand, as consumer prices remained flat and a factory-gate price fall deepened, data released on Monday showed.
The consumer price index (CPI) was unchanged from a year earlier, down from 0.2 per cent growth in May, according to the National Bureau of Statistics (NBS).
This was below the expected rise of 0.1 per cent, according to the Chinese financial data provider Wind, and is the lowest reading since February 2021.
Beijing has set a CPI target of around 3 per cent growth for 2023.
Meanwhile, the producer price index (PPI), which reflects the prices that factories charge wholesalers for products, fell by 5.4 per cent in June, year on year, down from a fall of 4.6 per cent in May, to its lowest point since December 2015.
This was below expectations, with PPI having been expected to fall by 5 per cent last month, according to Wind.
“The data is weaker than expected. Further evidence that domestic demand is weak,” said Larry Hu, chief China economist at Macquarie Group.
Within the CPI, food prices in China increased by 2.3 per cent from a year earlier in June, compared to a rise of 1 per cent growth in May, while non-food prices decreased last month, year on year, falling by 0.6 per cent having remained flat in May.
Prices for pork, a staple on Chinese dinner tables, decreased by 7.2 per cent in June compared to a year earlier, while fruit prices increased by 6.4 per cent year on year and vegetable prices increased by 10.8 per cent.
China’s core consumer inflation rate, excluding the volatile prices of food and energy, increased by 0.4 per cent in June compared with a year earlier, down from 0.6 per cent growth in May.
“Producer price deflation deepened further last month to its lowest in more than seven years, and consumer price inflation dropped to a 28-month low of zero per cent,” said economists at Capital Economics.
“Core inflation continued to fall as the initial impact of reopening faded. We expect inflation to rise gradually later this year, but the upside will be limited, leaving room for further policy easing.”
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