China’s June consumer price inflation falls short of expectations amid weak demand

BEIJING (Reuters) – China’s consumer prices rose for a fifth straight month in June but fell short of expectations, while producer price deflation persisted as government support helped prop up a fragile recovery in the world’s second-largest economy.

China’s government is seeking to revive consumption after a faltering post-COVID recovery, but worries remain about more fundamental issues including a sluggish housing market and lingering employment insecurity that have depressed consumer and industrial activity and prompted calls for more effective policies.

Data from the National Bureau of Statistics (NBS) released on Wednesday showed China’s consumer price index (CPI) rose 0.2% in June from a year earlier, the lowest in three months, down from a 0.3% increase in May and below the 0.4% increase expected by economists in a Reuters poll.

“Deflation risks have not disappeared in China and domestic demand remains weak,” said Zhang Zhiwei, chief economist at Pinpoint Asset Management.

Food prices fell further despite supply disruptions caused by bad weather, highlighting weak demand.

Food prices fell 2.1% year-on-year, narrowing the decline from the 2% drop in May. In particular, fresh vegetable prices fell 7.3% after a 2.3% drop in May, while fresh fruit prices fell 8.7% after a 6.7% drop in May.

The consumer price index fell 0.2% from the previous month, down from a 0.1% decline in May and worse than the expected 0.1% decline.

The Producer Price Index (PPI) fell 0.8% year-on-year in June, smaller than the previous month’s 1.4% decline and in line with expectations for a 0.8% decline. It was the smallest PPI decline in 17 months.

(Reporting by Chao-Yi Lee and Ryan Wu; Editing by Jacqueline Wong)

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