China’s consumer prices have fallen for the fourth consecutive month in May, driven by deflation and declining demand. The country’s factory-gate or producer prices also deepened their decline, marking the steepest drop since July 2023.
Beijing’s stimulus measures appear insufficient to boost domestic consumption, with price wars in the auto sector contributing to downward pressure. The consumer price index fell 0.1% from a year earlier, while core inflation excluding food and energy prices rose 0.6%.
Deflation has been persistent since October 2022, with wholesale prices remaining in deflationary territory. Factory-gate prices for coal mining and oil and gas extraction firms saw the biggest drop, plunging 18.2% and 17.3%, respectively.
Chinese policymakers have urged the automotive industry to halt brutal price wars, which have hurt businesses’ profitability and efficiency. Despite exports holding strong, China’s economy relies on domestic demand to fight deflation.
The country’s top financial regulators recently cut interest rates by 10 basis points and lowered the reserve requirement ratio in a bid to bolster the tariff-hit economy. A preliminary deal between the US and China has eased tensions, but markets are watching whether Beijing will roll out more monetary easing to boost growth.
China is set to report its trade data for May later on Monday, with exports expected to rise 5% year on year while imports fell 0.9%. The annual Lujiazui forum, where major financial policies will be revealed, provides insight into the country’s economic outlook.
Source: https://www.cnbc.com/2025/06/09/china-cpi-ppi-may-deflation.html