With CPI rebounding for fourth month, has China shrugged off deflation fear?
- May’s consumer price index figures remain well below government control target but have stayed the same as the April increase
China’s consumer price index (CPI), a bellwether for inflation in the world’s second-largest economy, expanded in May by 0.3 per cent, year on year, but continued to hover well below a government target, the National Bureau of Statistics said on Wednesday.
China’s CPI has broken ranks with the high inflation of Western countries by holding near zero since April last year, fuelling deflation fears as the economy wrestles with hesitant consumption – a hallmark of the nation’s uneven recovery since the pandemic.
Meanwhile, China’s producer price index (PPI), which gauges the cost of goods as they leave the factory, declined for the 20th straight month in May with a year-on-year fall of 1.4 per cent, improving from a fall of 2.5 per cent in April.
“These are broadly in line with expectations. I think the deflationary pressure has not faded yet,” said Zhiwei Zhang, president and chief economist at Pinpoint Asset Management.
“The improvement in PPI is largely driven by commodity prices such as copper and gold, which is not a reflection of China’s domestic demand.”
