China CPI rises in May while factory deflation eases

China's consumer prices experienced a slight increase in May, with the consumer price index (CPI) rising by 0.3% from the previous year, according to the National Bureau of Statistics. This marks the fourth consecutive month of deflation. The rise fell short of the median forecast of 0.4% in a Bloomberg survey. Concurrently, the producer price index (PPI) dropped by 1.4%, indicating continued deflation at the factory-gate level.

Despite government efforts to boost the economy, including measures to stimulate the housing sector and job market, domestic demand remains weak. Local governments have increased utility costs and train fares, which may contribute to the CPI rise but could also limit household spending power. Economists anticipate that consumer prices will grow by 0.7% this year, significantly below the official target of 3%.

The steady consumer inflation and easing producer price declines suggest that further support measures may be necessary to achieve economic stability. Core inflation, which excludes volatile food and energy prices, stood at 0.6% year-on-year, down from 0.7% in April. The current trends imply that Beijing may need to implement additional fiscal stimulus to meet its GDP growth target of around 5% for the coming year.