A recent CICC research report forecasts that China’s May Consumer Price Index (CPI) will likely hold steady at -0.1% year-on-year, unchanged from April. The food sector continues to drag on inflation, with the Shouguang vegetable price index plunging 16.3% year-on-year in May—a steeper drop than April’s 14.2% decline. Pork prices also faced downward pressure due to increased supply from secondary fattening operations and weaker-than-expected holiday demand, leading to a 0.6% month-on-month drop in provincial average pork prices by late May.
While food prices weigh on inflation, non-food consumer goods—boosted by government trade-in policies—are expected to maintain a ”price-for-volume” trend, supporting consumption. Service prices may also see a moderate recovery, potentially offsetting some deflationary pressures. However, the persistent softness in food costs, particularly vegetables and pork, underscores ongoing challenges in achieving sustained CPI growth.
With inflation hovering near negative territory, policymakers may face renewed calls for targeted stimulus to bolster domestic demand. The divergence between slumping food prices and stabilizing non-food categories highlights the uneven nature of China’s consumption recovery, requiring nuanced measures to ensure balanced economic momentum.
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