China's producer prices hit 4-year high in June, consumer prices also rise

Amid sustained upward pressure on energy prices stemming from instability in the Middle East, China's consumer price index and producer price index both continued to rise last month. The PPI increase in particular reached its highest level in roughly four years.

China's PPI rose 4.1 percent year-on-year in June, the National Bureau of Statistics announced Thursday. That marks the highest reading since July 2022, when the index climbed 4.2 percent — a span of 47 months — and is in line with analyst forecasts compiled by Bloomberg.

China's monthly PPI had remained in negative territory for more than three years during and after the COVID-19 pandemic, from October 2022 onward, before snapping a 41-month consecutive decline in March with a 0.5 percent gain. The index has widened its increase every month since, rising 3.9 percent in May.

By sector, non-ferrous metal mining (+25.5%), smelting and processing (+23.4%), petroleum and coal processing (+16.8%), chemical raw materials (+16.7%) and chemical product manufacturing (+11.3%) led the PPI gains. Coal mining and washing prices jumped 20.6 percent, while electrical machinery and equipment manufacturing (+5.1%), computer, communications and electronic equipment manufacturing (+3.3%) and ferrous metal smelting and rolling (+3.1%) also posted increases.

Prices fell in non-metallic mineral products (-4.4%), electricity production and supply (-4.4%), alcoholic beverages and drink manufacturing (-5.3%) and automobile manufacturing (-2.1%).

The CPI rose 1.0 percent year-on-year in June. That is slightly below the analyst consensus of 1.1 percent compiled by both Bloomberg and Reuters, and below the 1.2 percent gain recorded in May.

China's CPI had remained in negative territory through the third quarter of last year amid deflation concerns, before turning positive in October of that year with a 0.2 percent gain. It has now risen for nine consecutive months.

Industrial consumer goods prices (+2.9%) were the main driver of last month's CPI increase. Gold jewelry (+28.1%) and gasoline (+17.0%) prices remained strong contributors to the gain, even as their pace of increase eased from May. Service prices also rose 0.8 percent, led by healthcare (+3.4%) and education (+0.6%).

Food prices fell 1.6 percent, though the decline narrowed by 0.1 percentage point from May.

Pork prices continued to slide, falling 15.9 percent, while prices for fresh vegetables, fruit, grains, cooking oil, dairy products and seafood declined between 0.3 and 1.7 percent. Egg prices, however, surged 20.0 percent, widening their gain by 11.6 percentage points from May.