After a yearlong run-up that pushed producer inflation to the highest level in more than a decade, China’s factory-gate prices rose at a slightly slower pace in June, raising hopes among economists that inflation in the world’s second-largest economy may have hit a turning point.
China’s producer-price index rose 8.8% in June from a year earlier, edging down from May’s year-over-year surge of 9.0%, the National Bureau of Statistics said Friday. The reading was in line with forecasts from economists polled by The Wall Street Journal. It was the first time the figure declined from the previous month since last October.
Apart from a higher base of comparison last year, the modest slowdown in the inflation measure was driven primarily by slower increase in global metal prices and Beijing’s recent efforts to tame the domestic commodities rally, the statistics bureau said.
Chinese authorities’ warnings to metals producers against hoarding and price fixing and their move to release state reserves of copper and aluminum helped push a measure of raw-materials prices last month to its lowest level since October.
“The policy of ensuring supply and stabilizing domestic commodity prices has shown success,” Dong Lijuan, a senior analyst at China’s statistics bureau, said Friday. “The price increase of industrial products has slowed down.”
Supply-chain constraints and production bottlenecks that have fueled inflationary pressure for much of this year have also likely peaked, as manufacturing starts to catch up with demand, according to economists at HSBC.
Consumer-price inflation, meantime, ticked 1.1% higher in June from a year earlier, slightly lower than economists’ forecast for a 1.2% gain and suggesting domestic consumer sentiment remains sluggish more than a year after the pandemic was largely brought under control within China’s borders.
A continued plunge in pork prices, a mainstay of the Chinese diet and a large component in China’s basket of goods and services, helped keep overall consumer inflation in check. The year-over-year decline in pork prices steepened to 36.5% in June from the previous month’s 23.8% year-over-year drop.
The fresh readings released Friday prompted economists to predict a stabilization in producer inflation after a year of rising factory-gate prices, as well as a muted outlook for consumer prices through the end of the year.
“Concerns about price pressures in China look set to ease over the coming months,” Julian Evans-Pritchard, senior China economist at Capital Economics, told clients in a note.
The numbers from Beijing also add to evidence of inflation tapering off across the region. In the Philippines, the year-over-year gain in headline consumer prices eased to 4.1% in June from 4.5% in the previous month, while in Taiwan, a key production base for semiconductors, consumer inflation moderated to 1.9% in June, down from May’s 2.5% reading.