Consumer inflation slowed from May while factory-gate prices accelerated, underscoring a two-speed economy driven by exports and manufacturing rather than household demand.
China’s consumer inflation softened in June even as wholesale price growth accelerated, highlighting continued weakness in domestic demand alongside stronger upstream pricing. Consumer prices rose 1% from a year earlier, below economists’ 1.1% forecast in a Reuters poll and slower than May’s 1.2%, while the producer price index climbed 4.1%, matching expectations and quickening from 3.9% in May. The divergence reflects an economy where household spending remains under pressure even as manufacturers face elevated input costs. Factory-gate prices returned to growth in March as the Middle East conflict pushed up commodity costs, ending one of China’s longest deflationary stretches in decades. Wholesale prices were also supported by rising demand for artificial intelligence computing power, which lifted prices for tech equipment and semiconductors. At the same time, June’s official PMI (purchasing managers’ index) suggested some easing in cost pressures. The input cost inflation gauge fell to a six-month low of 54.2 from 60.5 in May, and the output price sub-index dropped to 48.2 from 51.9, its first contraction this year, pointing to a pullback in industrial price momentum. The inflation data came as the International Monetary Fund raised its 2024 China growth forecast to 4.6% from 4.4% while cutting its global forecast to 3%. China has set a 4.5%-5% growth target for the year. The IMF said high-tech manufacturing, exports and frontloaded public infrastructure investment were supporting the outlook. Analysts cited by Reuters said that export- and manufacturing-led resilience may strengthen Beijing’s reluctance to launch broad stimulus for weak consumption, with the late-July Politburo meeting seen as the next key moment to watch for any policy escalation.