China’s CPI Inflation Eases in June, PPI Contracts at Slowest Rate in 16 Months

In June, Chinese consumer inflation decreased as persistent concerns over the economy kept spending limited, while producer inflation contracted for the 20th consecutive month, though at a slower pace. The National Bureau of Statistics reported on Wednesday that the consumer price index (CPI) inflation grew 0.2% year-on-year, falling short of the 0.4% expectation and down from the 0.3% in the previous month.

Month-on-month, CPI inflation shrank by 0.2% in June, worse than the expected 0.1% contraction and a decline from the 0.1% drop in May, indicating a continuing deflationary trend. Consumer spending has not picked up meaningfully recently, as economic uncertainty in China has led consumers to reduce discretionary spending.

High unemployment, concerns about a property market downturn, and insufficient stimulus measures from Beijing have contributed to China’s disinflationary trend. Additionally, the weak yuan has further reduced spending.

However, producer price index (PPI) inflation showed some improvements in the manufacturing sector. PPI inflation shrank by 0.8% in June, meeting expectations and improving from the 1.4% contraction in the prior month. This marks the slowest pace of PPI contraction since February 2023, thanks to continued government support for China’s factories.

Despite this, manufacturing represents only one aspect of China’s economy. Weak consumer spending presents near-term challenges as the country struggles with a slow economic rebound.