In June, China experienced a slump in both its annual Consumer Price Index (CPI) and its Producer Price Index (PPI), with the latter marking its sixth consecutive month of decline.
On Monday, July 10, data from the National Bureau of Statistics revealed that China's June CPI remained static year-on-year, a downtick from May's growth of 0.2%. Month-on-month, it declined by 0.2%, matching the decline of the previous month.
Meanwhile, the PPI in June saw a year-on-year decrease of 5.4%, surpassing May's decrease of 4.6%, marking the sixth straight month of expanding decline. Month-on-month, the PPI slipped by 0.8%, narrower than the previous value of 0.9%, decreasing the margin by 0.1 percentage points.
According to Chief Statistician Dong Lijuan from the Urban Department of the National Bureau of Statistics, the slight drop in the CPI and the general stability in the consumer market are evident in June's inflation data. The decline in PPI on both a month-to-month and year-on-year basis was influenced by factors such as the continued fall in prices of bulk commodities like oil and coal, as well as high comparison base from the previous year.
In June, the annual CPI growth rate dropped to 0%, while pork prices fell 7.2% year-on-year. For the entire first half of 2023, national consumer prices have risen by an average of 0.7% compared to the same period last year. Food prices went up by 2.3%, while non-food prices fell by 0.6%. Consumer goods prices decreased by 0.5%, while service prices increased by 0.7%.
Calculations for June's year-on-year CPI change estimate a carryover effect of approximately 0.5 percentage points from last year's price changes, consistent with the previous month. The new effect from this year's price changes was approximately -0.5 percentage points, compared to -0.3 percentage points last month.
Looking at year-on-year changes, the prices of fresh vegetables, tubers, fresh fruits, and poultry have increased significantly, with increases ranging between 4.3% and 10.8%. Food and beverage prices increased by 2.0% year-on-year, contributing approximately 0.55 percentage points to the CPI increase.
Non-food prices, which had remained stable last month, declined by 0.6% in June, with four out of seven categories increasing, one remaining flat, and two declining. Within non-food prices, service prices rose by 0.7%, while the price of industrial consumer goods fell by 2.7%, with energy prices dropping by 9.3%. Prices for other goods and services and educational, cultural and recreational items increased by 2.4% and 1.5%, respectively. Healthcare and clothing prices increased by 1.1% and 0.9%, respectively. Housing prices remained stable, while transportation, communication, and household goods and services decreased by 6.5% and 0.5%, respectively.
In terms of month-on-month changes, affected by high temperatures and rainfall, fresh vegetable prices shifted from a decrease of 3.4% last month to an increase of 2.3%. Other food supplies were generally plentiful, with most prices decreasing.
The impact of falling international oil prices caused domestic energy prices to drop by 0.7%, increasing the decline by 0.5 percentage points compared to last month. Influenced by factors such as the "618" promotional activities by businesses, industrial consumer goods prices, excluding energy, shifted from remaining flat last month to a decrease of 0.3%. As the demand for services continued to recover, service prices switched from a decrease of 0.1% last month to an increase of 0.1%. With the market supply becoming tight, the price of Chinese medicinal materials increased by 1.7%.
PPI Declines Year-on-Year, Narrows Month-on-Month Amid Falling Commodity Prices
In June 2023, China's industrial producer factory prices fell by 5.4% year-on-year and 0.8% month-on-month. The prices for producers to purchase industrial inputs also declined, down 6.5% year-on-year and 1.1% month-on-month. For the first half of the year, the factory prices for industrial producers dropped 3.1% compared to the same period last year, with purchase prices for producers slipping by 3.0%.
According to calculations, in the 5.4% year-on-year decrease in the Producer Price Index (PPI) for June, about -2.8 percentage points are due to changes in last year's prices, similar to the previous month. The new impact of this year's price changes accounts for approximately -2.6 percentage points, up from -1.8 percentage points the month before.
Year-on-year, June's PPI was mainly affected by the cost of production materials. Factory prices for industrial producers fell by 6.8%, an increase of 0.9 percentage points, contributing to a roughly 5.26 percentage point decrease in the overall factory price level for industrial producers. Mining industry prices plummeted 16.2%, raw materials industry prices fell by 9.5%, and processing industry prices dropped 4.7%.
Consumer goods prices saw a decrease of 0.5%, expanding the decrease by 0.4 percentage points, and contributing to about a 0.17 percentage point decline in the overall factory price level for industrial producers. Within this, food prices decreased by 0.6%, clothing prices increased by 1.0%, general daily necessity prices rose by 0.3%, and durable consumer goods prices dropped by 1.5%.
Among the 40 major industrial sectors surveyed, prices in 25 sectors decreased, one less than the previous month.
In key industries, prices in the petroleum and natural gas extraction industry, petroleum, coal and other fuel processing industry, chemical raw materials and chemical products manufacturing industry, and the coal mining and washing industry fell between 14.9% and 25.6%, all expanding their declines.
The combined impact of these four petroleum and coal-related industries contributed to a roughly 2.81 percentage point year-on-year decline in PPI, an increase of 0.71 percentage points from the previous month. Prices in the ferrous metal smelting and rolling processing industry and non-ferrous metal smelting and rolling processing industry fell by 16.0% and 7.2% respectively, narrowing the decline by 0.8 and 1.2 percentage points.
Additionally, prices in the manufacturing of cultural, educational, sports, and entertainment products rose by 4.9%, aircraft manufacturing prices increased by 4.1%, medical equipment and instrument manufacturing prices rose by 1.8%, prices in the power and thermal production and supply industry increased by 1.3%, and textile, clothing, and apparel industry prices rose by 0.6%.
Month-on-month, June's PPI was also primarily affected by the cost of production materials. Factory prices for industrial producers dropped by 1.1%, contributing to a roughly 0.78 percentage point decrease in the overall factory price level for industrial producers. Mining industry prices fell by 3.5%, raw materials industry prices dropped 1.6%, and processing industry prices decreased by 0.6%.
Affected by the continued decline in international crude oil prices and fluctuations in non-ferrous metal prices, prices in the petroleum, coal, and other fuel processing industry, petroleum and natural gas extraction industry, and non-ferrous metal smelting and rolling processing industry decreased by 2.6%, 1.6%, and 0.8% respectively. Prices in coal mining and washing industry and ferrous metal smelting and rolling processing industry decreased by 6.4% and 2.2%, respectively. Some technology-intensive industries saw price increases, with aircraft manufacturing prices rising by 1.0%, smart consumer equipment manufacturing prices increasing by 0.4%, and medical equipment and instrument manufacturing prices increasing by 0.2%. Moreover, prices for wind and solar power production in electricity production increased by 2.6% and 1.4%, respectively.
Consumer goods prices dropped by 0.2%, contributing to a roughly 0.04 percentage point decline in the overall factory price level for industrial producers. Within this:
Food prices fell by 0.2%, clothing prices rose by 0.3%, general daily necessity prices increased by 0.1%, and durable consumer goods prices decreased by 0.4%.
Additionally, within the prices for industrial producers to purchase inputs, fuel power prices dropped by 2.8%, chemical raw materials prices fell by 2.0%, building materials and non-metals prices decreased by 1.6%, ferrous metal materials prices fell by 1.3%, agricultural and sideline product prices dropped by 1.0%, and non-ferrous metal materials and wire prices fell by 0.5%. Meanwhile, textile raw material prices increased by 0.3%.
