A container ship docks at a container terminal in Qingdao, eastern China’s Shandong province, on June 25, 2026.
– | AFP | Getty Images
China’s consumer prices grew slower than expected in June, but wholesale inflation accelerated as rising energy costs continued to weigh on domestic demand.
Consumer prices rose 1% in June from a year earlier, data released by the Office for National Statistics on Thursday showed, lower than the 1.1% growth forecast by economists polled by Reuters and slowing from 1.2% in May.
Core CPI, which excludes volatile food and energy prices, also rose 1% year-on-year in June, slowing slightly from the 1.1% rise in May. Food prices fell 1.6% from a year ago, slowing from a 1.7% decline in May.
The producer price index rose 4.1% year-on-year, in line with economists’ expectations and above May’s 3.9%. This was the largest increase since July 2022, according to LSEG data. However, official data showed that PPI fell by 0.3% month-on-month.
Tiancheng Xu, senior economist at the Economist Intelligence Unit, attributed the year-on-year strength to a low base effect, but said: “Oil prices are generally easing, which will hinder PPI gains.” “Factories are unable to fully pass on rising costs to downstream customers,” Xu added, underscoring the deep-rooted weakness in domestic demand.
Producer prices fell 3.6% year-on-year in June last year, the worst decline in nearly two years, as intensified price competition spread throughout the economy.
The economy returned to growth in March, ending one of China’s longest periods of deflation in decades, even as input costs rose due to conflicts in the Middle East. In addition to rising commodity prices due to war-related supply disruptions, increased demand for artificial intelligence computing power has also pushed up wholesale prices, pushing up the prices of high-tech equipment and semiconductors.
However, the official PMI for June showed input cost inflation slowing to a six-month low of 54.2 from 60.5 in May, while the output price sub-index fell to 48.2 from 51.9, the first negative turn of the year, indicating a rebound in upstream and downstream industrial prices that soared during the war.
The International Monetary Fund on Wednesday said it expects China’s economy to outperform the world this year, raising its growth forecast for the country to 4.6% from its previous forecast of 4.4%, while cutting its global growth forecast to a weaker 3%. China has set a modest growth target of 4.5% to 5% this year.
They attributed that optimism to China’s strong high-tech manufacturing and export performance, as well as front-loaded public infrastructure investments.
Neo Wang, China strategist at Evercore ISI, said many investors in China increasingly see double-speed growth, characterized by strong exports and weak consumption and housing markets, as the defining long-term profile of China’s economy.
Wang added that consumer sentiment remains weak as households continue to grapple with the negative wealth effects of the prolonged housing recession.
The resilience of the export- and manufacturing-led economy is expected to increase Beijing’s reluctance to deploy stimulus measures to revive sluggish consumer demand. “Policymakers are likely to refrain from large-scale new stimulus unless the economic slowdown persists beyond the conflict,” said Gabriel Wildo, managing director at Teneo.
Wildau cited a top policy meeting of 24 members of the Communist Party’s Politburo in late July as “the next opportunity to strengthen policy stimulus.”
