Inflation China Misses Expectations: Are Deflation Risks Rising?

Beijing, China – The latest data from the National Bureau of Statistics in China revealed that consumer price inflation rose by 0.2% in June from a year ago, falling short of expectations. On the other hand, producer prices aligned with forecasts, showing a decline in line with predictions. Economists had anticipated a higher increase in the consumer price index, expecting it to rise by 0.4% year-on-year in June, as noted in a recent Reuters poll.

In contrast, the producer price index, which measures factory-gate prices, saw a drop of 0.8% from a year ago, consistent with expectations. Core CPI, excluding more volatile food and energy prices, increased by 0.6% year-on-year in June, slightly slower than the 0.7% uptick for the first six months of the year.

Notable changes in specific sectors were observed, with pork prices surging by 18.1% in June from a year earlier, while beef prices declined by 13.4%. Additionally, tourism prices experienced a 3.7% year-on-year increase in June, representing a slight decrease from the previous month.

Zhiwei Zhang, the chief economist at Pinpoint Asset Management, expressed concerns about the risk of deflation in China, attributing it to weak domestic demand. Zhang emphasized the importance of exports in supporting growth during the first half of the year. The upcoming release of trade data for June is anticipated to shed more light on China’s economic performance.

In contrast to other major economies like the U.S., where prices have remained relatively high, China has struggled with lackluster domestic demand, contributing to the subdued inflation levels observed. Analysts will continue to monitor these trends closely to assess the future trajectory of China’s economy amidst ongoing challenges.