China consumer prices up in May, factory deflation persists

BEIJING, China — Consumer prices in China rose slightly last month, data showed Wednesday, but analysts warned more work was needed to boost demand as leaders struggle to reignite growth in the world’s number two economy.

The consumer price index rose 0.3 percent on-year in May, unchanged from the increase recorded in April and the fourth straight month in positive territory, according to the National Bureau of Statistics.

However, the figure was off the 0.4 percent forecast by a Bloomberg survey of analysts.

Factory gate prices, meanwhile, continued to fall, extending a deflationary run that has persisted since late 2022.

READ: China factory indicator falls in May, suggesting growth has faltered

The producer price index (PPI) dropped 1.4 percent on-year last month, though that was an improvement on the 2.5 percent plunge suffered in April and slightly better than Bloomberg forecasts.

Chinese leaders have been seeking to boost consumer spending as economic headwinds such as mounting property sector debt and youth unemployment continue to drag on growth.

READ: China eyes support for consumer, private sectors as growth falters

“The improvement in PPI is largely driven by commodity prices such as copper and gold, which is not a reflection of China’s domestic demand,” Zhiwei Zhang, president and chief economist of Pinpoint Asset Management, said in a note.

Recent decisions by authorities aimed at easing pressure on the real estate sector are a “step in the right direction”, Zhang said, adding that “property sales in recent weeks have not rebounded”.

“A more comprehensive and proactive policy stance covering (the) fiscal, monetary, and property sector may be necessary to boost domestic demand more effectively.”