China's Price Slide Deepens As Deflation Pressures Build

(MENAFN- The Rio Times) China's National Bureau of Statistics reported that the country's consumer price index (CPI) fell 0.1 percent year-on-year in May, marking the fourth consecutive month of decline.

Factory-gate prices, measured by the producer price index (PPI), dropped 3.3 percent compared to a year earlier, the steepest fall in nearly two years. These figures highlight mounting deflationary pressure across the economy.

Lower energy prices played a major role in the CPI drop, contributing almost half a percentage point to the annual decline. Food prices also fell by 0.4 percent, while non-food prices stayed flat.

The core CPI, which excludes food and energy, rose 0.6 percent, suggesting some underlying stability in services and other goods.

The PPI's sharper drop reflects falling international crude prices, weaker demand for industrial goods, and a seasonal slowdown in construction and energy use. Purchasing prices for industrial producers also fell 3.6 percent year-on-year.



China's economy faces several challenges. Factory activity contracted for the fourth straight month in April, and retail sales growth in early 2025 was the weakest since mid-2023. The property sector continues to drag down growth, with new home prices falling in most major cities.

In response, the central bank cut the required reserve ratio for banks, freeing up about 1 trillion yuan for lending. It also introduced targeted lending facilities to boost consumer spending and technology investment.

The government has taken steps to stabilize the stock market and support business confidence. These official figures show that China's economy struggles with weak demand, falling prices, and ongoing trade tensions.

Deflation can reduce company profits, slow wage growth, and discourage investment, making it harder for China to sustain growth targets. The country's policy response aims to counter these risks and maintain economic stability.

MENAFN09062025007421016031ID1109650632