A container ship is docked at a container terminal in Qingdao, eastern Shandong province on June 25, 2026.
– | Afp | Getty Images
Chinese consumer prices grew more slowly than expected in June, while retail inflation accelerated, as higher energy costs continued to dampen domestic demand.
Consumer prices rose 1% in June from a year ago, missing economic estimates of 1.1% growth in a Reuters poll, and down from 1.2% in May, according to data released by the National Bureau of Statistics on Thursday.
Core CPI, excluding volatile food and energy prices, rose 1% in June from a year ago, down from a 1.1% increase in May. Food prices fell 1.6% from a year ago, down from a 1.7% drop in May.
The producer price index rose 4.1% from a year ago, in line with economists’ forecasts and exceeding May’s 3.9%. That marked the strongest growth since July 2022, according to LSEG data. However, month-on-month, the PPI fell by 0.3%, official data showed.
“Oil prices are generally lower, and this will prevent the PPI from rising,” said Tianchen Xu, a senior economist at the Economist Intelligence Unit, while saying that the annual strength is due to the low effect. “Factories cannot fully pass on cost increases to downstream customers,” added Xu, highlighting the weakness in domestic demand.
Producer prices recorded their worst drop in nearly two years in June last year, down 3.6% from a year earlier, as a price war rages in the economy.
They returned to growth in March on input costs rising after the Middle East conflict, helping to end China’s longest string of currency cuts in decades. In addition to higher commodity prices owed to war-led supply disruptions, wholesale prices have also been boosted by growing demand for artificial intelligence computing power, which is driving up prices of technical equipment and semiconductors.
China’s manufacturing activity grew faster than expected in June, with experts citing foreign demand including AI-related technologies as driving the momentum.
Many investors in China increasingly view two-speed growth — marked by strong exports against weak consumption and the housing market — as the long-term defining feature of the Chinese economy, said Neo Wang, China strategist at Evercore ISI.
Consumer sentiment remains subdued as households continue to face the negative impact of wealth from the protracted housing slump, Wang added.
An economic recovery led by exports and manufacturing is expected to strengthen Beijing’s reluctance to issue stimulus to revive tepid consumer demand. “Policymakers are likely to avoid new stimulus unless the decline continues beyond the conflict,” said Gabriel Wildau, managing director at Teneo.
Wildau points to the top policy meeting of the Communist Party’s 24-member Politburo in late July as “the next opportunity to increase policy mobilization.”
The International Monetary Fund on Wednesday predicted that China’s economy will outpace global economic growth this year, raising its forecast for China’s growth to 4.6%, from its previous forecast of 4.4%, while reducing global growth to 3%. China has set a target of moderate growth of 4.5%-5% this year.
They attributed that optimism to China’s strong manufacturing and export performance, as well as rampant public infrastructure investment.
