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Domestic demand is falling below expectations in China

The country saw its consumer price index grow just 0.2 percent in June, about half of what economists had predicted, indicating sluggish consumer demand
  • The index has been stagnant since last April, constrained by an economic slowdown, job cuts and property market woes

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PUBLISHED

UPDATED: 11 Jul 2024, 8:00 am

Growth in China’s consumer price index (CPI) fell short of expectations in June, increasing by just 0.2 percent year-on-year, the South China Morning Post reports. Economists polled by Chinese financial data provider Wind had predicted an increase of 0.41 percent.

June’s growth was also down from a 0.3 percent increase in May, according to National Bureau of Statistics (NBS) data. Core inflation (excluding volatile food and energy prices), meanwhile, was up 0.6 percent when compared with June 2023.

The country’s producer price index (PPI), which measures the average change in prices received by domestic producers for their output, fell by 0.8 percent last month. That was its 21st consecutive month of decline and followed a 1.4 percent drop in May.

[See more: ‘We’ve taken a long term view.’ Top banker bullish on China]

China’s CPI has been stagnant since April last year, accompanying an economic slowdown marked by property market woes and job cuts across sectors. The moribund index indicates weak consumer demand.

The Bank of China expects consumer prices to rise by 0.7 percent in the third quarter, then 1.4 per cent in the fourth quarter – with annual growth averaging at 0.6 percent. “The upcoming summer holiday, Mid-Autumn Festival and National Day holidays are bright spots for tourism consumption, residents’ spending willingness on tourism, education and other services has increased, and service-consumption prices will remain on the upwards trajectory,” it said.

Gary Ng, a senior economist at Natixis Corporate and Investment Bank, told the Post that the government would need to adopt “more countercyclical and demand-side policies” in order to reach its annual gross domestic product growth target of 5 percent.

UPDATED: 11 Jul 2024, 8:00 am

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