China Inflation June 2019


China: Inflation stabilizes in June; PPI stalls

July 10, 2019

Consumer prices fell 0.1% from the previous month in June, following May’s flat reading. The print mostly reflected lower prices for transportation and communication as result of a large decline in fuel prices.

Inflation was steady at May’s 2.7% in June. The print was in line with the result that market analysts had expected. Annual average inflation stabilized at May’s 2.2% in June.

Producer price inflation (PPI), meanwhile, was flat in June, following May’s 0.6%. The reading was below market analysts’ expectations of 0.2%.

Analysts are warning that deflationary risks are slowly resurfacing. In this regard, Betty Rui, senior China economist at ANZ, remarks that:

“Deflationary risks have re-emerged in China, as seen in the plunge in June’s PPI and non-food CPI to a new low not seen since Q3 2016. […] Since PPI and non-food CPI have a strong correlation with profits in the manufacturing and services sectors, respectively, the undershooting of inflationary expectations will exert pressure on real economic activity. […] The slippage in inflation is likely to weigh on real activities, suggesting a rising need for more counter-cyclical measures.”

FocusEconomics Consensus Forecast participants expect that consumer inflation will average 2.2% in 2019, which is unchanged from last month’s estimate. In 2020, the panel also sees consumer inflation at 2.2%. Meanwhile, the panel expects producer inflation to be 1.7% in 2019, which is down 0.4 percentage points from last month’s projection. In 2020, panelists also see producer inflation at 1.7%.

Author: Ricard Torné, Lead Economist

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China Inflation Chart

China Inflation June 2019

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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