China CPI inflation slows in June, PPI shrinks at slowest pace in 16 months

Investing.com-- Chinese consumer inflation shrank in June as persistent concerns over China’s economy kept spending largely limited, while producer inflation contracted for a 20th consecutive month, albeit at a slower pace. 

Consumer price index inflation grew 0.2% year-on-year in June, data from the National Bureau of Statistics showed on Wednesday. The reading was weaker than expectations for a print of 0.4%, and contracted from the 0.3% seen in the prior month.

Month-on-month CPI inflation shrank 0.2% in June, compared to expectations for a contraction of 0.1%. The print worsened from a 0.1% drop seen in May, indicating that a deflationary trend in China remained largely in play. 

The weak CPI reading comes as consumer spending failed to pick up meaningfully in recent months, as uncertainty over China’s economic outlook saw consumers sharply scale back discretionary spending. 

Relatively high unemployment, concerns over a property market downturn and laggard stimulus measures from Beijing all factored into China’s disinflationary trend. Weakness in the yuan also ate into spending.

But producer price index inflation reflected some improvements in the country, at least on the manufacturing front. PPI inflation shrank 0.8% in June, in line with expectations and improving further from the 1.4% contraction seen in the prior month.

The figure also showed PPI inflation shrinking at its slowest pace since February 2023, amid continued government support for China’s factories. 

But manufacturing is still only one facet of China’s economy, with weak consumer spending presenting more near-term headwinds for the country, as it grapples with a laggard economic rebound.

Focus is now on the Third Plenum of the Chinese Communist Party- a meeting of top-level officials that is set to take place later in July, for more cues on economic support.