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To be honest, according to latest reading, there is no improving sign in deflation whatsoever in China, even which is further weakening fueled by the embattled property sector as well as deteriorating price war in auto industry.
According to data from the National Bureau of Statistics released Monday, China’s consumer prices fell for a fourth consecutive month in May. The consumer price index fell 0.1% from a year earlier, compared with the median estimate for a 0.2% decline among analysts. The CPI slipped into negative territory in February, falling 0.7% from a year ago, and continued to post year-on-year declines of 0.1% in March and April.
Core inflation, excluding food and energy prices, however, rose 0.6% in May — highest since January this year. Separately, deflation in the country’s factory-gate or producer prices deepened, falling 3.3% from a year earlier in May, a sharper decline than analysts’ expectations for a 3.2% drop. The wholesale prices have remained in deflationary territory since October 2022.
Persistently weaker consumer demand has been a key factor for deflation, and the price war in auto sector which had hurt businesses' profitability and efficiency is making deflation worsen, and the price war in auto sector is also another signal of fierce competition driving prices lower. On the flip side, falling property prices also contributed to the downward pressure in consumer prices.
It seems Beijing’s stimulus measures appear insufficient to boost domestic consumption, but ultimately China has to rely on domestic consumption to fight deflation. It might be a bumpy road.Complete digital access to quality Glebors financial topic with expert analysis from industry leaders.
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