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China Inflation May 2024

China: Consumer inflation remains stable in May; producer prices fall

Consumer inflation was stable at April’s 0.3% in May, undershooting market expectations. Higher non-food prices were largely offset by lower food prices. Consumer prices fell 0.10% in May over the previous month, contrasting April’s 0.10% rise. Finally, the annual average variation of consumer prices was unchanged at April’s minus 0.1% in May.

Meanwhile, producer prices fell 1.4% on an annual basis in May, which was a more modest fall compared to April’s 2.5% decrease.

Soft domestic demand, huge industrial capacity and the weak housing sector have capped consumer price pressures so far this year, and should continue to do so later in 2024. Over 2024 as a whole, consumer inflation is seen among the lowest levels in Asia.

On the near-term outlook, Nomura analysts said:

“In view of the jump in wholesale pork prices (20.5% y-o-y during 1-11 June), softening leisure services activity during the Dragon Boast Festival, and ongoing auto price cuts, we expect CPI inflation to pick up modestly to 0.4% y-o-y in June. PPI inflation may rise further to -0.7% y-o-y in June, due mainly to a still-low base (June 2023: -0.8% m-o-m). The recent sequential increase in prices of construction materials, such as cement, may also indicate higher PPI inflation. Overall, we expect CPI inflation to stay positive over the remainder of the year, although it may remain below 1% until Q4, due to the sluggish state of the economy.”

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