China’s consumer inflation remained steady in May even as producer price pressures continued to build. CPI held unchanged at 1.2% yoy, falling slightly short of expectations for a 1.3% yoy increase, while core CPI edged down from 1.2% yoy to 1.1% yoy. The data suggest that despite rising costs at the factory gate, underlying consumer demand remains relatively restrained.
A major factor holding down consumer inflation was food prices, which fell -1.7% yoy. Pork prices, a key component of China’s food basket, plunged -16.1% yoy, offsetting broader inflationary pressures elsewhere in the economy. The softer core CPI reading also indicates that businesses are still facing challenges passing higher costs on to consumers, despite stronger economic activity and improving trade performance in recent months.
In contrast, producer prices accelerated sharply from 2.8% yoy to 3.9% yoy, matching expectations and reaching their highest level since July 2022. The National Bureau of Statistics attributed the increase to higher commodity prices and stronger demand in selected industries.
The energy shock linked to disruptions in global oil markets has played a major role in lifting China’s factory-gate inflation, helping PPI return to positive territory in March for the first time since September 2022.
| Indicator | April | May | Forecast |
|---|---|---|---|
| CPI Y/Y | 1.2% | 1.2% | 1.3% |
| Core CPI Y/Y | 1.2% | 1.1% | |
| PPI Y/Y | 2.8% | 3.9% | 3.9% |
| PPI M/M | 1.7% | 0.5% |
