China’s consumer inflation falls short of expectations, but faster recovery expected

Meanwhile, China’s producer price index (PPI) – which measures the cost of goods at the factory gate – slipped by 0.8 per cent last month, falling for the 21st consecutive month, having also fallen by 1.4 per cent in May.

The reading fell short of the expected 0.75 per cent decrease projected by Wind.

Elsewhere, China’s core inflation, which excludes volatile food and energy prices, rose by 0.6 per cent last month compared to a year earlier.

On a month-on-month basis, China’s inflation in June remained negative after falling by 0.2 per cent following a 0.1 per cent decrease in May, according to the NBS.

The world’s second-largest economy is experiencing its longest period of deflation since the 2009 global financial crisis, fuelling market concerns about whether Beijing can meet its 3 per cent annual CPI growth target.

Several of China’s public utility companies have increased the price of some services, including water, electricity and gas, amid rising cost pressures and tightened finances.

However, the increased prices have a relatively limited impact on overall consumer prices as they constitute only about 5 per cent of the CPI, according to the Bank of China’s third-quarter economic outlook report released at the end of June.

Economists at the Bank of China expect consumer prices to rise by 0.7 per cent in the third quarter and 1.4 per cent in the fourth quarter, with annual growth averaging at 0.6 per cent.

“The upcoming summer holiday, Mid-Autumn Festival and National Day holidays are bright spots for tourism consumption, residents’ spending willingness on tourism, education and other services has increased, and service consumption prices will remain on the upwards trajectory,” they said.

More to follow …