China’s producer price index (PPI) dropped 3.6% in June from a year earlier, the sharpest decline since July 2023, official data showed Wednesday, deepening concerns over deflation as price wars and weak demand weigh on the economy.
The fall was steeper than the 3.2% drop forecast by analysts in a Reuters poll and extends a nearly two-year streak of factory-gate deflation.
In contrast, consumer inflation showed a slight rebound. The consumer price index (CPI) rose 0.1%, beating expectations for a flat reading. Core CPI, excluding food and energy, increased 0.7%, the fastest pace in 14 months.
Economists say the rebound is fragile. “Without strong stimulus, deflation will persist,” said Larry Hu of Macquarie. Analysts cite China’s property sector slowdown and intense competition as key drags.
Policymakers, at a recent meeting chaired by President Xi Jinping, criticized excessive discounting tactics and urged businesses to shift focus from price cuts to product quality.
Meanwhile, exports remain resilient, rising 4.8% in May, easing pressure for immediate economic intervention.
Despite slight consumer gains, analysts warn deflation risks remain elevated without broader demand recovery.
