China’s consumer price growth came in weaker than expected in June, while wholesale inflation accelerated, with elevated energy costs continuing to weigh on domestic demand.
Consumer prices rose 1% in June from a year ago, missing economists’ estimates of 1.1% growth in a Reuters poll, and slowing from 1.2% recorded in May.
The data was released by the National Bureau of Statistics on Thursday, adding to a mixed inflation picture for the world’s second-largest economy.
Core CPI, which excludes volatile food and energy prices, also rose 1% in June from a year earlier, edging down from the 1.1% increase seen in May.
Food prices declined 1.6% from a year earlier in June, a slight improvement from the 1.7% fall recorded the previous month.
The producer price index jumped 4.1% from a year earlier, in line with economists’ forecasts and outpacing May’s reading of 3.9%.
Factory-gate prices had returned to growth in March, with input costs rising on the back of the Middle East conflict, helping end one of China’s longest deflationary streaks in decades.
Beyond higher commodity costs tied to war-related supply disruptions, wholesale prices were also lifted by growing demand for artificial intelligence computing power, pushing up prices for tech equipment and semiconductors.
June’s official PMI showed input cost inflation easing to a six-month low of 54.2 from 60.5 in May, while the output price sub-index fell to 48.2 from 51.9, marking the first contraction this year.
The International Monetary Fund on Wednesday raised its growth forecast for China to 4.6%, up from a previous projection of 4.4%, while trimming its global growth forecast to a sluggish 3%.
The IMF attributed that optimistic view to China’s robust high-tech manufacturing and export performance, as well as frontloaded public infrastructure investments, even as China has set a modest growth target of 4.5% to 5% this year.
Many investors in China increasingly view the two-speed growth as a defining long-term feature of the Chinese economy, according to Neo Wang, China strategist at Evercore ISI.
Wang described that dynamic as marked by robust exports versus weak consumption and a struggling housing market, noting that consumer sentiment remains subdued.
“Consumer sentiment remains subdued as households continue to grapple with the negative wealth effect stemming from the prolonged housing downturn,” Wang added.
The export and manufacturing-led economic resilience is widely expected to reinforce Beijing’s reluctance to roll out major stimulus measures aimed at reviving tepid consumer demand.
“Policymakers are likely to refrain from major new stimulus unless the slowdown persists beyond the conflict,” said Gabriel Wildau, managing director at Teneo.
Wildau pointed to a top policy meeting by the 24-member Politburo of the Communist Party in late July as “the next opportunity to escalate policy stimulus.”
