Deflationary pressures in China look to be easing

Photo by Kevin Frayer/Getty Images

Chinese consumer price inflation (CPI) has missed expectations, rising by 2.0% in the year to May.

The figure was below expectations for an increase of 2.3%, a level that would have been unchanged from April.

It was the lowest annual growth rate recorded since January this year.

Over the month CPI fell by 0.5%, again below estimates for a smaller decline of 0.2%.

Continuing the theme of prior month, all of the strength was concentrated in food inflation, offsetting persistent weakness in non-food inflation.

Food inflation rose by 5.9% from a year earlier while non-food inflation rose by a far smaller 1.1%.

Although CPI undershot market estimates, there was better news on producer price inflation with the annual decline narrowing to 2.8%.

This was well ahead of the 3.3% contraction expected and 3.4% decline seen in the 12 months to April.

It was also the smallest year-on-year drop since November 2014, suggesting that upstream deflationary pressures are moderating.

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