(Yicai Global) June 9 -- China’s consumer price index, a gauge of consumer inflation, advanced at a faster clip in May than in April, as the drop in the price of fresh produce slowed, pushing up food prices. But the producer price index, a measure of industrial profits, sank to the biggest contraction since March 2016 on weak demand, according to the latest data.

In May, the CPI climbed 0.2 percent from a year ago, an increase of 0.1 percentage point from April’s annual gain, according to figures released by the National Bureau of Statistics today. But the PPI slumped 4.6 percent, a much bigger drop than April’s 3.6 percent.

The faster growth in consumer prices was largely due to a smaller yearly decline in vegetable prices in May than in April, which together with the low base line last year propelled food prices upwards, said Wang Qing, chief macro analyst at Golden Credit Rating International.

Food prices advanced 1 percent last month, higher than April’s 0.4 percent growth, pushing the CPI up 0.19 percentage point, the NBS said.

Non-food prices grew steadily, largely on the back of an increase in the price of services. The price of fuel, though, posted a bigger drop last month from a year earlier due to global prices tumbling and the high base number in 2022.

The core CPI, which excludes the prices of food and energy, gained 0.6 percent last month from a year ago, a drop of 0.1 percentage point from April’s growth rate, NBS data showed.

Factory Prices

The price of manufactured products tumbled both at home and abroad, dragging the PPI down, said Cheng Qiang, chief macro analyst at CITIC Securities. The monthly average spot price of Brent crude oil dropped by nearly USD10 per bucket last month from April and the price of copper and deformed steel bars also dived.

The PPI will continue to contract in the first half, but should start to expand in the second half as the high base line from last year dissipates and demand for raw materials and finished products rises as the economy recovers, Wang said. The PPI should grow around 1 percent this year from last year.

The CPI will continue to expand slightly year on year in the short term, but will return to a reasonable growth rate as policies to boost demand take effect, the economy becomes more active, employment improves, incomes increase, consumers gain confidence and consumption scenarios expand, NBS spokesman Fu Linghui said last month.

International factors will continue to affect the PPI and the price of some industrial products will continue to fall in the short term, Fu said. The PPI will likely improve in the second half as the economy recovers and demand picks up.

Editor: Kim Taylor