Explainer | China inflation: 3 takeaways from May’s price data as deflation worries rose
- China’s consumer price index (CPI) rose by 0.2 per cent in May, year on year, while the producer price index (PPI) fell by 4.6 per cent last month
- Low consumer inflation and expanded producer price decline add to ongoing debate over deflation risks in China
China is looking to domestic demand to aid its economic recovery amid falling global demand for its signature exports, but fears over deflation are another headache for policymakers in Beijing, who are being urged to roll out stronger monetary support.
1. CPI fans deflation worries
This was lower than the expected rise of 0.3 per cent, according to Chinese financial data provider Wind, and still well below Beijing’s target of around 3 per cent growth for 2023.
But even as consumer price inflation edged up, it “remained depressed”, said analysts at Capital Economics.
Analysts said the increase in CPI, after it had fallen to its lowest level in more than two years in April, was driven by a pickup in food prices.
Within the CPI, food prices rose by 1 per cent from a year earlier in May, compared with a rise of 0.4 per cent growth in April, while non-food prices remained stable last month, year on year, down from an increase of 0.1 per cent growth in April.
Prices for pork, a staple dish on Chinese tables, fell by 3.2 per cent in May compared with a year earlier, while fruit prices rose by 3.4 per cent and vegetable prices fell by 1.7 per cent.
Consumer demand continued to recover, and the market operated generally smoothly, with the CPI falling on a monthly basis and widening slightly from a year earlier
The rise in food-price inflation offset a slight fall in core inflation, which excludes the volatile prices of food and energy, as core inflation rose by 0.6 per cent in May compared with a year earlier, down from 0.7 per cent growth in April.