China’s inflation stays flat at 0.3% YoY in May

China’s Consumer Price Index (CPI) held steady in May at 0.3 per cent year-on-year, matching April’s figure but missing forecasts. Producer Price Index (PPI) eased slightly by 1.4 per cent compared to a 2.5 per cent drop in April.

However, economists warn a fragile domestic demand and uneven economic recovery require further stimulus from Beijing.

Low consumer confidence, fuelled by the ongoing property crisis, has kept a lid on inflation despite government support measures. The month-on-month CPI gauge even dipped 0.1 per cent, compared to analyst expectations of flat growth.

Producer prices, which have been falling since September 2022, showed some improvement. The decline slowed to 1.4 per cent in May, exceeding the forecasted 1.5 per cent drop. However, experts believe this is largely due to rising commodity prices, not a reflection of domestic demand.

The core inflation measure, excluding volatile food and energy prices, also highlighted the challenge. The gauge stood at a low 0.6 per cent year-on-year in May, down from 0.7 per cent in April.

China aims for five per cent GDP growth this year. While many economists expect further support measures, most believe a comprehensive fiscal and monetary policy package is crucial to restore confidence and encourage spending.

Attribution: Reuters