China producer prices slump in June
By Michele Maatouk
Date: Monday 10 Jul 2023
(Sharecast News) - Producer prices in China slumped again in June, according to figures released on Monday by the National Bureau of Statistics, fuelling concerns about deflation.
Producer price inflation fell 5.4% year-on-year in June from 4.6% a month earlier and versus expectations of a 5% drop. This marked the worse decline since December 2015.
Meanwhile, the consumer price index slowed to 0% in June year-on-year from 0.2% in May, coming in below consensus expectations for it to be unchanged. This marked the lowest reading since February 2021.
Zichun Huang, China economist at Capital Economics, said: "PPI deflation is likely to ease somewhat in the second half of the year, partly because infrastructure spending should put a floor under commodity prices. And core inflation could rise gradually, as a relatively tight labour market puts greater upward pressure on wages.
"Fuel price deflation, a key factor behind subdued headline inflation recently, will probably wane over the coming months. As such, we expect headline inflation to rise to around 1% by the end of this year. But this would still be soft and won't constrain the PBOC's ability to loosen policy further.
"That said, with credit demand weak, and the currency under pressure, we think the bulk of support will come through fiscal policy. We expect only another 10bp of policy rate cuts this year."
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