BEIJING (Reuters) – China’s consumer inflation continued in May while producer prices eased, but the underlying trend suggests Beijing will need to do more to meet weak domestic demand and an uneven economic recovery.
The consumer price index (CPI) rose 0.3% in May from a year ago, matching the gain in April, data from the National Bureau of Statistics (NBS) showed on Wednesday, below the 0.4% increase forecast in a Reuters poll.
The CPI fell 0.1% from the previous month, compared to a 0.1% increase in April and compared to economic forecasts of zero growth.
The slide in the producer price index (PPI) eased to 1.4% in May from 2.5% in April, compared with forecasts for a 1.5% decline.
“I think the inflationary pressure is not over yet,” said Zhiwei Zhang, an economist at Pinpoint Asset Management.
“CPI inflation is slightly negative in mom terms. The improvement in PPI is mainly due to commodity prices such as gold, which is not an indicator of China’s domestic demand,” he said.
China’s economy has struggled to move forward despite the end of strict COVID restrictions in late 2022, largely due to the negative effects of the long-term crisis in the property sector on investors, businesses and consumer confidence.
Beijing has rolled out several measures to stimulate demand in the housing sector and introduced other programs to boost consumer sentiment, including providing government-sponsored subsidies to encourage trade in cars and other consumer goods.
It also vowed to create more jobs linked to major projects, rolled out measures to improve domestic needs aimed at the youth and promised to boost finances to boost growth.
Wednesday’s data on inflation, which excludes volatile food and energy prices, highlighted weakness in domestic demand. It stood at 0.6% in May year-on-year, down from 0.7% in April.
Many economists expect that Beijing will unveil more support measures in the coming months to keep the economy on track to reach its GDP growth target of “around” 5% this year, and encourage a more stable return.
“A comprehensive and effective policy stance that includes the financial, financial, and real estate sectors may be necessary to effectively boost domestic demand,” Pinpoint’s Zhang said.
