(Yicai Global) June 10 -- China’s consumer price index, a key gauge of inflation, ticked up 2.1 percent in May from the same period last year, far below the 2.23 percent growth forecast by an Yicai Global survey of chief economists. However, China must stay alert to imported inflation in the second half given the rising international grain and energy prices, analysts said.

May’s year-on-year CPI growth was on a par with April's, but on a monthly basis it dipped 0.2 percent from April, compared with April’s 0.4 percent month-on-month gain, according to the latest figures released by the National Bureau of Statistics today. Vegetable prices were the main drag on the CPI.

The upward pressure on consumer prices has eased now that the Covid-19 outbreaks in April have passed and inflation is under control, Li Qilin, chief economist at Hongta Securities, told Yicai Global.

However, global commodity prices will continue to stay high due to geopolitical tensions and tight supply chains, so China must stay alert to imported inflation for the rest of this year, he added.

The CPI for June is likely to stay around the same level and inflation is unlikely to exceed the country's 3 percent cap this year, said Wang Qing, chief macro analyst at Golden Credit Rating International.

Factory Gate Prices

The producer price index which, measures industrial profitability, slowed for the seventh straight month to 6.4 percent in May from a year earlier, mainly due to last year’s high base and weak demand amid the resurgence of Covid-19. The 19 economists polled by Yicai Global had forecast a 6.51 percent gain.

The downward trend of the PPI will not change thanks to a series of supply and price stabilization measures from the government but the decline in growth will narrow, said Wu Chaoming, deputy director of Chasing International Economic Institute.

The gap between the PPI and the CPI closed last month, indicating micro and small companies are facing less cost pressure and that recent support policies are helping bolster business. This will boost the driving force for economic growth and stabilize the employment market, Wang said.

Editor: Kim Taylor