China’s consumer price growth came in below expectations in June, while wholesale inflation accelerated, as elevated energy costs continued 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 China’s National Bureau of Statistics on Thursday, confirming a continued softness in household spending power across 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, but still reflecting persistent weakness in consumer-facing sectors.
The producer price index jumped 4.1% from a year earlier in June, in line with economists’ forecasts and outpacing May’s reading of 3.9%.
Factory-gate prices had returned to growth in March as input costs rose on the back of the Middle East conflict, helping end one of China’s longest deflationary streaks in decades.
Wholesale prices were also lifted by growing demand for artificial intelligence computing power, pushing up prices for tech equipment and semiconductors alongside war-related commodity supply disruptions.
June’s official PMI data 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 its previous projection of 4.4%, while trimming its global growth forecast to a sluggish 3%.
The IMF attributed its optimistic view on China to robust high-tech manufacturing and export performance, as well as frontloaded public infrastructure investments, even as consumer demand remains tepid.
Many investors increasingly view China’s two-speed growth, marked by robust exports versus weak consumption and a struggling housing market, as a defining long-term feature of the Chinese economy, according to Neo Wang, China strategist at Evercore ISI.
Wang added that consumer sentiment remains subdued as households continue to grapple with the negative wealth effect stemming from the prolonged housing downturn.
“Policymakers are likely to refrain from major new stimulus unless the slowdown persists beyond the conflict,” said Gabriel Wildau, managing director at Teneo.
Wildau points 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.”