Weak domestic demand further cools China’s consumer inflation

SHANGHAI - China’s consumer inflation cooled further in June as factory gate prices continued to fall, pointing to continued weak domestic demand. The Consumer Price Index, the main gauge of inflation, in June grew 1.9% from a year earlier, down from 2% in May and 2.3% in April, the National Bureau of Statistics said.

Yu Qiumei, a Bureau researcher, said a 1.4% month-on-month drop of food prices, accounting for nearly one- third of the CPI basket, contributed to the lower CPI reading from May. Prices of vegetables, fruit and eggs were lower than May while pork prices rose more slowly, Yu told the Shanghai Daily. Prices in the non-food sector rose 0.2% from last month, led by petrol prices, while the start of summer holidays also drove up flight and travel costs.

The Producer Price Index, a measurement of inflation at the factory gate and an indication of future prices at the consumer end, fell 0.2% month-on-month, ending consecutive increase of three months.

On a year-on-year basis, the PPI fell 2.6%, the 52th consecutive month of decline, although narrowing from May’s 2.8% and April’s 3.4%. HSBC’s chief China economist, Qu Hongbin, said the inflation data indicates that domestic demand has not yet recovered and that deflationary pressure lingers. www.webershandwick.cn (ATI).