Growing Domestic Consumption To Mitigate China’s Inflation Numbers Missing  Expectations – BusinessToday

Growing Domestic Consumption To Mitigate China’s Inflation Numbers Missing  Expectations – BusinessToday

Growing domestic consumption is expected to continue supporting China’s growth in the second half of 2024 underpinned by the government stimulus and policy measures, said MIDF Research today, citing news reports on China’s consumer prices rising by 0.2% in June from a year ago, missing expectations for a 0.4% increase.

MIDF Research, in a note today, said China’s consumer price inflation moderated slightly to +0.2%yoy in Jun-24 (May-24: +0.3%yoy), lower than market expectations of +0.4%yoy.

Food prices further contracted by -2.1%yoy (May-24: -2.0%yoy), marking a 1-year deflationary trend due to falling prices of vegetables, fresh fruits, milk, cooking oils and eggs.

Excluding volatile price items, core inflation remained steady at +0.6%yoy. Goods prices declined by -0.1%yoy after remaining unchanged in the past 2 months.

Services inflation also decelerated to +0.7%yoy, a 4-month low. Compared to the previous month, consumer prices contracted further by -0.2%mom (May-24: -0.1%mom), a sharper decline than -0.1%mom anticipated by the market expectations.

Similarly, core CPI fell by -0.1%mom (May-24: -0.2%mom), marking the 2nd consecutive month of deflation. Meanwhile, China’s producer prices continued to signal deflationary risk as PPI continued to fall albeit slower at -0.8%yoy in Jun-24 (May-24: -1.4%yoy).

MIDF Research added China’s PPI has been deflating since Oct-22, but the decline in Jun-24 was the mildest PPI deflation since Jan-23.

The persistent deflationary risk reflects the weak demand pressures, apart from the falling cost pressures. This may call for more stimulus from the government and perhaps additional easing by the PBOC, particularly if demand condition deteriorates.

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