China’s Consumer Prices Fall for Fourth Straight Month, Raising Deflation Concerns

China’s consumer prices fell for the fourth straight month in May, with the latest data showing a 0.1% year-on-year decline. This indicates continued deflation concerns, worsened by a price war in the automotive industry. Core inflation rose slightly, though factory-gate prices fell deeper than expected. Policymakers are urged to consider additional actions amid ongoing trade negotiations with the U.S.

China’s economy is facing serious challenges as consumer prices dropped for the fourth month in a row this May. According to the National Bureau of Statistics, the consumer price index (CPI) dropped by 0.1% from the previous year—just slightly better than the 0.2% decline that analysts had expected. This downturn reflects ongoing struggles to stimulate domestic consumption, particularly in light of aggressive pricing tactics in the auto sector which keep exerting downward pressure on prices.

The CPI entered negative territory in February, with losses deepening in March and April, marking ongoing deflationary trends. At the same time, core inflation, which excludes food and energy, experienced a slight increase of 0.6% in May. This is the highest core inflation reading since January, putting a bit of a silver lining on the otherwise troublesome economic landscape.

Also notable is the worsening deflation in factory-gate prices, falling 3.3% from a year ago—worse than the expected 3.2% drop. These wholesale prices have been in decline since October 2022, signaling a more significant issue at the core of China’s economic engine. According to Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, it is not solely consumer demand to blame but a fierce price war in the automotive sector also plays a role.

In summary, China’s economic outlook is increasingly grim with consumer prices continuing to fall for four consecutive months. The slight uptick in core inflation provides some hope, but persistent deflation in key areas alongside worsening conditions in factory prices pose significant risks. Policymakers must struggle to manage these pressures while addressing trade tensions, particularly as renewed negotiations with the U.S. commence amidst existing tariffs and restrictions. As markets await upcoming trade data and a financial forum, any further movements by regulators could be critical in navigating these tough economic waters.

Original Source: www.nbcsandiego.com

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