China consumer price growth weaken in June while producer inflation quickens

While consumer prices in China increased more slowly than expected in June, wholesale inflation accelerated as high energy costs continued to negatively affect domestic demand.

Consumer prices rose 1% in June from a year ago, according to data published Thursday by the Office for National Statistics; It missed economists’ forecasts for 1.1% growth in a Reuters poll, slowing from 1.2% in May.

The producer price index increased by 4.1% compared to the previous year, in line with economists’ forecasts, surpassing the 3.9% in May.

Ex-factory prices returned to growth in March as input costs rose amid conflict in the Middle East, helping end one of China’s longest deflationary streaks in decades. In addition to high commodity costs resulting from supply disruptions due to the war, increased demand for artificial intelligence computing power has also increased wholesale prices, causing technical equipment and semiconductor prices to rise.

However, June’s official PMI showed that input cost inflation fell to 1 percent six-month low 54.2 The output price sub-index, which was at 60.5 in May, fell from 51.9 to 48.2. This year’s first contraction signaled a decline in upstream and downstream industrial prices that had risen during the war.

China’s economy will outperform the world this year, the International Monetary Fund predicted Wednesday. Increased growth forecasts for China to 4.6 percentWhile it increased compared to the previous estimate of 4.4%, it reduced its global growth forecast to 3%. China has set a modest growth target of 4.5-5 percent this year.

They attributed this optimistic view to China’s strong high-tech manufacturing and export performance, as well as front-loading public infrastructure investments.

Many investors in China increasingly see two-speed growth (marked by strong exports versus weak consumption and the housing market) as a long-term defining feature of the Chinese economy, said Neo Wang, China strategist at Evercore ISI.

Wang added that consumer sentiment remains weak as households continue to grapple with the negative wealth impact from the prolonged downturn in the housing sector.

Economic resilience from exports and manufacturing is expected to strengthen Beijing’s reluctance to impose stimulus to revive sluggish consumer demand. “Unless the slowdown continues beyond the conflict, policymakers will likely avoid major new stimulus,” said Teneo chief executive Gabriel Wildau.

Wildau points to a high-level policy meeting of the Communist Party’s 24-member Politburo in late July as “the next opportunity to increase policy stimulus.”