China consumer prices rise in May as factory deflation continues

China’s consumer prices rose in May, holding above zero for a fourth month after the country saw its worst deflation streak in over a decade.


The consumer price index rose 0.3% from a year earlier, China's National Bureau of Statistics said on Wednesday, posing the same modest gain it did in April and comparing to a median forecast of 0.4% in a Bloomberg survey of economists.

Factory-gate prices remained stuck in deflation, as they’ve been since late 2022, with the producer price index sliding 1.4% in May from a year earlier. Economists surveyed by Bloomberg had expected a 1.5% drop after the index declined 2.5% in April.

The government has struggled to spur higher household spending amid a prolonged real estate slump and a weak job market. Falling producer prices are squeezing companies’ profits and making them reluctant to invest. There’s also a risk consumers could become even more reluctant to spend in anticipation that goods will be cheaper in the future.

China’s economy recently suffered its longest deflation streak since the Global Financial Crisis because domestic demand remained weak even after the country re-opened from Covid. Economists surveyed by Bloomberg forecast consumer prices to increase by 0.7% this year, a far cry from the 3% official target.

Some of the rise in consumer prices may be due to administrative decisions rather than any improvement in demand. Local governments have been increasing utility costs and train fares in recent months, a move that could push the price index higher but leave households with less spending power for other purchases.