China’s consumer price inflation flatlined in June and wholesale prices tumbled adding to fears that the world’s second-largest economy is on the brink of heading into deflation.
The consumer price index was flat year on year and declined 0.2% compared with the previous month, while factory gate prices fell at the fastest pace since 2016 as demand for consumer and manufactured products softened.
China’s producer prices fell by 5.4%, the fastest decline in more than seven years and an acceleration from the 4.6% dip in May.
The figures added to calls for the Chinese authorities to launch a stronger stimulus package to sustain the country’s faltering post-Covid recovery.
Food inflation rose in June partly because of higher prices for vegetables, which increased 10.8% year on year compared with a decline of 1.7% in May.
But pork prices were low due to weak demand, falling 7.2% year on year in June.
Susannah Streeter at Hargreaves Lansdown said: “’The continued loss of power in the Chinese economy is concerning investors, with consumer prices flatlining.”
“While inflation shows signs of stubbornness in other economies, disinflationary forces are at work in China, which risk tipping the world’s second largest economy into a deflation scenario. “
Neil Wilson at markets.com said: “This soft data would tend to suggest the central bank will cut rates again and could see further stimulus from Beijing.”