Concern about deflation in China

China’s National Bureau of Statistics (UIB) announced May 2023 data on price increases in the country.

In April, the Producer Price Index (IPP) decreased 4.6 percent compared to the same period of the previous year, while the Consumer Price Index (CPI) increased 0.2 percent.

While the downward trend in producer prices continued for 7 months in May, the slight increase in consumer prices below expectations points to deflation risk in the medium to long term.

PPI LOWERED 4.6 PERCENT ANNUALLY IN MAY

The drop registered in the last quarter of 2022 in the PPI, which is calculated from the ex-factory prices of manufacturing products, continued in the first five months of this year.

In May, the PPI decreased 0.9 percent compared to the previous month and 4.6 percent annually.

The drop in producer prices was above last month’s 3.6 percent year-on-year decline and financial services service Wind’s expectation for a 4.3 percent drop.

UIB senior statistician Dong Licüen commented that the downward trend in international prices of raw materials, the weak demand for industrial products in domestic and foreign markets, and the high price base in the same period of the year past were effective in lowering producer prices.

QUARANTINE MEASURES INCREASE IN MANUFACTURER PRICES

Quarantine measures and restrictions imposed during the Covid-19 outbreaks in the cities that were home to the country’s key industrial lines in the spring of last year had pushed up producer prices.

The fall in producer prices in the last quarter of last year was due to the contraction and loss of activity in the manufacturing sector in the last months of the year due to the Covid-19 restrictions.

Despite the restrictions being lifted at the end of 2022, the fact that producer prices remain volatile in the new year shows that the manufacturing sector has not been able to regain the recovery momentum and deflationary pressure continues.

CONSUMER PRICES ARE LOOKING SLIGHTLY

On the other hand, the CPI, which is considered the main indicator of inflation, rose 0.2 percent on an annual basis in May, up from 0.1 percent last month, but was below the expectation of an increase of 0. .3 percent of Wind.

Stagnant consumer prices declined 0.2 percent on a monthly basis, continuing the downward trend of 0.1 percent in April.

Food prices rose 1 percent in May, while non-food inflation held steady. Core consumer inflation, which excludes food and energy prices, was 0.6 percent.

The government, in its work report presented to the National People’s Assembly on March 5, stated that its goal is to keep inflation around 3 percent this year. (AA)