In May, China’s factory gate deflation worsens 2023

China’s factory gate prices fell more rapidly than anticipated in May, as weakening demand weighed on manufacturing, impeding the fragile economic recovery, and consumer inflation fell short of expectations, according to data released on Friday.

According to the National Bureau of Statistics (NBS), the producer price index (PPI) declined by 4.6% in May, marking the eighth consecutive month of decline. In a questionnaire conducted by Reuters, economists had predicted a decline of 4.3%.

The consumer price index (CPI) increased by 0.2% year-over-year following a 0.1% increase the previous month, missing expectations of a 0.3% increase.

China’s economy grew faster than anticipated in the first quarter, but May factory activity and imports declined, according to recent data.

China’s GDP grew 4.5% annually in the first quarter, exceeding expectations.

Some economists anticipate that the People’s Bank of China (PBOC) will reduce interest rates or discharge additional liquidity into the financial system. In March, the bank reduced the reserve requirements ratio for lenders.

China’s largest banks announced on Thursday that they had reduced deposit interest rates, providing some respite to the financial sector and broader economy by alleviating pressure on profit margins and lowering lending costs.

The largest state institutions in China reduced deposit rates.

In light of ongoing symptoms of deceleration, analysts have lowered their projections for economic growth this year. The government has set a modest GDP growth target of approximately 5 percent for this year, after missing the target by a wide margin in 2022.