According to Reuters, due to the weakening global demand, manufacturing prices in China fell at the fastest pace in nearly seven years in May, higher than expected, casting a shadow over the economic recovery. With rising interest rates in the United States and Europe and inflation squeezing demand, the number of orders received by Chinese factories in overseas markets has decreased, and prices have sharply declined. According to the latest data from the National Bureau of Statistics, the Producer Price Index (PPI) in May has fallen for the eighth consecutive month, by 4.6%. This is the fastest decline since February 2016 and is greater than Reuters’ estimate of 4.3%.
The growth rate of the Chinese economy in the first quarter of 2023 exceeded expectations, but recent indicators indicate that demand is rapidly weakening, with both import and export volumes and factory activity indices declining in May. The Consumer Price Index (CPI) increased by 0.2% year-on-year, higher than the 0.1% growth rate in April. The government has set a target of around 3% for the average consumer price in 2023.
Julian Evans Pritchard, head of macroeconomics at Capital Investment in China, stated in a statement that the tightening of the labor market may bring some upward pressure to inflation in the second half of the year, but it will still be within an acceptable range. After announcing last year that the Chinese economy is growing at its slowest pace in nearly half a century, the government is accelerating growth by stimulating consumption.
Some economists expect the People’s Bank of China (PBOC) to cut interest rates or release more liquidity into the financial system. The bank reduced the reserve requirement ratio for lenders in March. Industrial and Commercial Bank of China announced on Thursday that they have lowered deposit interest rates, providing some relief for the financial industry and the broader economy by easing pressure on profit margins and reducing loan costs.
Post time: Jun-12-2023