Shanghai (China) (EFE).- The consumer price index (CPI), the main indicator of inflation in China, experienced a new slowdown when it fell to 0% year-on-year in June, which means that prices remained at same levels as a year ago.
The rate for June, offered today by the National Statistics Office (ONE), is the lowest in the last 28 months and represents a drop of 0.2 percentage points compared to that of the previous month, of 0.2% year-on-year.
The data was below what was expected by analysts, among whom the most widespread forecast was that of an increase of precisely 0.2%.
The ONE statistician Dong Lijuan assured that the consumer market remained “basically stable” in June, and highlighted the fall in the favorite meat of Chinese consumers, pork (-7.2% year-on-year), while among non-food prices, the most significant decrease was that of transport fuel (-17.6%).
In the month-on-month comparison, consumer prices fell 0.2% compared to May, while analysts expected 0.1%.
Zichun Huang, an analyst at the British consultancy Capital Economics, assured that the aforementioned fuel deflation -which marked a 31-month low- “will probably fade in the coming months”, something that, together with the upward pressure on salaries due to the situation in the labor market, could cause the CPI to pick up to around 1% towards the end of this year.
The CPI, at minimums of more than seven years
The ONE also published today the producer price index (IPP), which measures industrial prices and which fell 5.4% year-on-year in June, a decrease 0.8 points more pronounced than that registered the previous month and more also pronounced than expected by the experts, who predicted a drop of around 5%.
Dong attributed this evolution to the high comparative base of last year and the “continuous decline” in the prices of raw materials such as oil or coal.
Capital Economics highlighted that the interannual rate of the PPI in June was the lowest in more than seven years, and points to the low demand both nationally and internationally as responsible for the month-on-month fall of 0.8%, with special impact on the energy, metal and chemical prices.
However, Huang expects producer price deflation to also “moderate somewhat” during the second half of 2023, as infrastructure spending should help put a floor on commodity prices.
If Capital Economics’ CPI and PPI forecasts are confirmed, the People’s Bank of China (PBOC, central) would not be affected in its ability to ease its policies further.
“That said, with credit demand sluggish and the currency (the yuan) under pressure, we believe that most of the support measures will come through fiscal policy. We only expect another 10 basis points of interest rate cuts this year,” the expert explained.