CPI inflation climbed into the green for the first time since January, although producer prices remain in deflationary territory.
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China’s consumer-price index rose by 0.1% in June year-on-year, from a fall of 0.1% in May, putting an end to four months of decline.
By subcategory, food prices remained in negative territory at -0.3%, non-food prices rose by 0.1%, and food, tobacco and alcohol rose by 0.1% year-on-year.
The price of transportation and communication, meanwhile, fell by 3.7%, and the price of “other supplies and services” rose by a dramatic 8.1%.
Subcategories such as clothing and "education, culture & entertainment" rose by 1.6% and 1.0% respectively.
Despite an uptick in CPI, the country’s producer-price index fell 3.6% year-on-year, widening from May’s 3.3% decline. That marks the 33rd straight month of falling prices and a 23-month low.
“Deflation remains a concern” in China, said Lynn Song, Chief Economist for Greater China with ING.
“One of the main reasons is a contractionary cycle featuring heavy price competition as well as pay freezes and pay cuts,” he continued.
“Policymakers, though, recently shifted attention toward addressing the problem, with an eye on improving market exit mechanisms, encouraging consolidation and restructuring, and addressing non-market practices resulting in excessive price competition.”
ING predicts a rate cut from the People’s Bank of China in the fourth quarter of this year.
