China Inflation May 2021


China: Consumer price inflation comes in at highest level since September 2020 in May, producer price inflation surges

June 9, 2021

Consumer prices fell 0.20% in May over the previous month, after the 0.30% fall logged in April.

Inflation came in at 1.3% in May, up from April’s 0.9%. May's figure was the highest inflation rate since September 2020. Meanwhile, the trend pointed down mildly, with annual average inflation coming in at 1.0% in May (April: 1.1%). Lastly, producer price inflation rose to 9.0% in May, from April’s 6.8%, marking the highest rate since 2008. Higher producer price inflation in recent months has been driven largely by surging global commodity prices.

To tame producer price pressures, the government is aiming to boost industrial supply, has encouraged firms not to raise prices, and has pledged action against price gouging and hoarding. Coupled with the stronger yuan, this could tame the upward movement in producer price inflation in the coming months, although the headline reading will likely stay elevated nonetheless. Regarding consumer prices, panelists see a pickup later this year, although improved pork supply as farmers rebuild their hog herds in the wake of African swine fever will keep a lid on the increase.

On producer prices, analysts at Nomura commented:

“As Beijing has rolled out a raft of policy measures to boost domestic supply of major raw materials including coal, iron ore, steel and electricity, we have seen some moderation in raw materials prices in recent weeks, with the average daily Nanhua price index for industrial products during 1–8 June falling slightly by 0.3% from the May monthly average. Therefore, PPI inflation of 9.0% y-o-y might mark the peak in this upcycle.”

Our panelists forecast that inflation will average 1.6% in 2021, which is unchanged from last month’s estimate, and 2.3% in 2022.


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China Inflation Chart

China Inflation May 2021

Note: Annual and monthly variation of consumer price index, and annual variation of producer price index, in %.
Source: National Bureau of Statistics of China (NBS).

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