China inflation: with CPI rebounds for 4th month, has China shrugged off deflation fear?

Food is likely to stay in deflation, though pork and egg prices are starting to stabilise “a little”, month to month, ING Greater China economist Lynn Song said on Tuesday.

China’s public sector had come under pressure before May to raise prices for services including train tickets and utilities amid cost pressure and tight local finances, analysts say.

High-speed-rail ticket prices on some routes are due to rise by around 20 per cent on Saturday, and tap-water rates are expected to go up in parts of the country.

Extended holiday travel for May Day would have contributed to any CPI increase last month, said Darius Tang, associate director of corporates with the Fitch Bohua rating service. Traveller demand supported both consumer and service prices, Tang said.

But China should expect little CPI change in the months ahead, he added, “due to the absence of effective domestic demand”.

More to follow …