Just-released consumer and producer price indexes 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 forecasts and up from 0.1% in April. Core inflation, which excludes volatile energy and food 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 declines.
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. Earlier, a series of other reports pointed to a contraction in manufacturing activity, a first decline in exports in three months and a slowing recovery in the housing market.
While the US and Europe face high inflation and rising interest rates, China is dealing with falling prices. "The risk of deflation is still weighing on the economy. Recent indicators are signaling that economic activity is cooling," 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 the expectation 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 move aimed at stimulating growth and boosting business and consumer 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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