Soft Producer Prices Stoke China Deflation Fears

By Glenn Dyer | More Articles by Glenn Dyer

For the first time in months, Chinese consumer inflation was steady in June, but there was a worrying slowdown producer price rises which fell to the slowest pace since mid-2016.

The June consumer-price index rose 2.7% compared with a year earlier, the same as in May and in line with market forecasts, China’s National Bureau of Statistics said on Wednesday.

The country’s producer price growth for the year was flat in June, sharply lower than the year before reading for June 2018 of 4.6%.

Economists say that if there’s another month or two of similar readings then it would appear that the deflationary pressures of a three years ago have returned.

The flat reading in June was down from the 0.6% rise reported in May. The Statistics Bureau said factory gate prices fell 0.3% in June from may, another sign of the strengthening of downward price pressures.

June’s PPI reading was the lowest since August 2016, according to the data.

Economists said the slowing in the PPI followed the contractions reported in the two surveys of manufacturing activity in June.

The Statistics Bureau said food prices in June rose 8.3%, on top of May’s 7.7% gain. Fresh fruit prices jumped 42.7% on the year, following a 26.7% surge in May. Pork prices rose 21.1%, after May’s 18.2% increase. On a month-to-month basis, June’s CPI edged down 0.1%, after staying flat in May.

Non-food prices increased by 1.4%, slowing from a 1.6% increase in May.

June’s core CPI, which excludes volatile food and energy prices, rose 1.6% from a year earlier, the same pace as in May.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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