China's CPI Up 0.2% YoY in June amid Weak Demand

China’s consumer price index (CPI) rose 0.2% year-on-year (YoY) in June 2024 as per data from the National Bureau of Statistics (NBS).

• In comparison, CPI in China rose 0.3% in May.
• It’s the fifth month in a row that CPI rose in China.

The China CPI figure for June fell short of the expected CPI growth of 0.4% estimated by economists polled by the Chinese financial data provider Wind. 

In June, prices recorded a significant movement on a YoY basis:

• Core CPI, which excludes more volatile food and energy prices, rose 0.6% YoY. It was the same figure in May.
• Food prices dropped 2.1% YoY. In May, it declined 2% YoY.
• Pork prices rose by a dramatic 18.1% YoY. In May, it rose 4.6% YoY.
• Beef prices, meanwhile, fell 13.4% YoY. In May, it fell 12.9% YoY.
• Fresh vegetable prices fell 7.3% YoY. In May, it rose 2.3% YoY.
• Fresh fruit prices fell 8.7% YoY. In May, it fell 6.7% YoY.
• Gasoline prices fell 6% YoY. In May, it fell 5.2% YoY.
• New energy vehicle (NEV) prices fell 7.4% YoY. In May, it fell 6.9% YoY. 

Many public utility companies in China have increased the prices of some utilities such as water, power and gas as costs rise and budgets tighten. 

China's PPI fell 0.8% in June

If we look at China’s producer price index (PPI), which estimates the cost of goods at production level, recorded a fall of 0.8% in June.

In May, PPI declined by 1.4%.

It’s the 21st month in a row that PPI dropped though the drop in the PPI was the smallest in 17 months.

However, the June figure is much better than the expected PPI drop of 0.82% estimated by economists at Wind. 

Image: CPI & PPI Rates in China
 

Fear of Deflation in China

These readings come amid a weak demand in China as the country’s economy is battling a prolonged property slump, a bleak job market and a limited post-COVID demand recovery.

Yuan, China’s national currency, slid to an eight-month low against the U.S. Dollar as CPI figures emerged point to a potential risk of deflation in the country.

The yuan was 0.04% lower at 7.2756 to the USD on 10 June.

China’s leadership is expected to soon take some key policy decisions such as a reform in the country’s taxation system and other kinds of policy support.