Consumer price indexes and producer prices just released showed the world's second-largest economy continued to weaken in May.
China's consumer price index (CPI) rose 0.2% in May from a year earlier, the National Bureau of Statistics said, matching expectations and up from 0.1% in April. Core inflation, which excludes volatile food and energy prices, slowed to 0.6% from 0.7%.
Meanwhile, the producer price index (PPI) fell 4.6% in May, more than the previous month and the worst in seven years, due to falling commodity prices and weaker domestic and international demand. Economists had forecast a 4.3% decline. This was the eighth consecutive month of PPI decline.
People shop at a market in Beijing (China). Photo: Reuters
The latest inflation figures showed the world’s second-largest economy continued to weaken in May, following a series of other reports showing manufacturing activity contracted, exports fell for the first time in three months and the housing market recovery slowed.
As the US and Europe face high inflation and rising interest rates, China is dealing with falling prices. "Deflation risks continue to weigh on the economy. Recent indicators are signaling cooling economic activity," said Zhiwei Zhang, chief economist at Pinpoint Asset Management.
Deflation is defined as a sustained and large-scale fall in the prices of goods and services over a period of time. This is not a positive thing for the economy. Because when consumers and businesses delay spending in anticipation of further price falls, economic problems become worse.
Analysts say the People's Bank of China (PBOC) will cut its one-year lending rate as early as next week, in a bid to stimulate growth and boost consumer and business confidence.
The PBOC will keep its one-year lending rate unchanged from September 2022. So to support small businesses, it will use other tools, such as selective lending.
Several major state-owned banks cut deposit rates on June 8, a move that is expected to pave the way for lower lending rates.
Ha Thu (according to Bloomberg, Reuters)
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