China’s Inflation Cools as Producer Prices Post First Decline in Eight Months

China’s inflation cooled in June, with producer prices posting the first monthly decline in eight months.

• The producer price index grew 8.8% in June, following the 9% peak recorded in May. This is the first monthly decline since October 2020.
• The consumer price index rose 1.1%, slower than 1.3% in May.
• The decline is in line with the drop in both input and output prices in the manufacturing purchasing managers’ index for the month.
• The moderation could also be partly due to base effects, with the PPI at -3.0% and the CPI at 2.5% in June 2020.
• Producer goods prices climbed 11.8% versus the previous month’s 12.0%, while consumer goods prices grew only 0.3% compared with May’s 0.5%.
• Consumers did not feel the rise in producer prices, due to strong competition among firms and the slow pickup in the local consumer spending.
• Economists expect the PPI to slow further and the CPI to climb in the remaining months of the year.