China’s producer prices fell the most in nearly two years, as the country’s factory-gate deflation deepens and overshadows a modest improvement in consumer prices.Factory deflation persisted into a 33rd month, with the producer price index falling 3.6% from a year earlier, the National Bureau of Statistics said Wednesday. The decline was more than economists had expected and faster than May’s 3.3% drop.
The consumer price index unexpectedly increased 0.1%, as consumer goods received a lift from government subsidies. Economists surveyed by Bloomberg had expected prices to drop 0.1% as they did in the previous three months.
The persistently weak inflation may put more pressure on policymakers to ramp up stimulus to escape a vicious cycle of falling prices, business profits and wages. It has also worsened the already cutthroat competition among companies, spurring price wars that policymakers now seek to curb.
Dong Lijuan, chief statistician at the NBS, said producer prices fell in part because adverse weather conditions affected construction work and put pressure on the prices of raw materials.A new consumer confidence index by Bloomberg Economics shows stronger policy support since late 2024 has failed to significantly lift confidence, mainly because improvement in job prospects and income growth has been limited.
The consumer price index unexpectedly increased 0.1%, as consumer goods received a lift from government subsidies. Economists surveyed by Bloomberg had expected prices to drop 0.1% as they did in the previous three months.
The persistently weak inflation may put more pressure on policymakers to ramp up stimulus to escape a vicious cycle of falling prices, business profits and wages. It has also worsened the already cutthroat competition among companies, spurring price wars that policymakers now seek to curb.
Dong Lijuan, chief statistician at the NBS, said producer prices fell in part because adverse weather conditions affected construction work and put pressure on the prices of raw materials.A new consumer confidence index by Bloomberg Economics shows stronger policy support since late 2024 has failed to significantly lift confidence, mainly because improvement in job prospects and income growth has been limited.
A flagship program to subsidize purchases has boosted consumption, but it was disrupted last month in several provinces that ran out of funds allocated by the national government. Authorities have since promised to disburse more money, although economists cautioned that Beijing needs more sustainable measures to revive sentiment.
Deflationary pressures have also been exacerbated by overcapacity across various industries. While Chinese leaders have vowed to cut output in some industries, some analysts warned the price wars would continue for years as local officials seek to avoid job losses.
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