China's Producer Deflation Deepens Amid Economic Pressures

China's Producer Deflation Deepens Amid Economic Pressures

China: China's producer prices declined at the fastest pace in nearly two years in May, while consumer prices continued to fall, reflecting persistent economic pressures from ongoing trade tensions and a prolonged housing market downturn. Data from the National Bureau of Statistics showed that the producer price index (PPI) dropped by 3.3% year-on-year in May, following a 2.7% fall in April. This marked the sharpest contraction in 22 months and was slightly steeper than the 3.2% decline forecasted in a Reuters poll. The data comes as manufacturing activity faces challenges, with the impact of United States tariffs weighing on output. Trade negotiations between the United States and China are set to resume in London, following recent discussions between President Joe Biden and President Xi Jinping concerning trade and critical mineral supply chains. 

On the consumer side, the consumer price index (CPI) fell by 0.1% in May compared to a year earlier, consistent with the previous month and slightly better than the anticipated 0.2% decrease. On a monthly basis, CPI declined by 0.2%, reversing a 0.1% rise in April. The core inflation rate, excluding food and energy, rose by 0.6% year-on-year, marginally above the 0.5% increase in April. Meanwhile, retail sales growth continued to slow amid weak consumer confidence, job market uncertainty, and stagnant home prices, despite recent government support efforts. As income pressures persist, some companies have lowered prices to stimulate demand, particularly in the automotive sector, prompting official calls to end competitive pricing strategies.  Source: Economic Times