BEIJING, June 9 (Reuters) – China’s producer deflation worsened in May, marking its most severe level in nearly two years, while consumer prices continued to decline. The economy is facing challenges from trade tensions and a prolonged downturn in the housing market. Uncertainty from a tariff conflict with the United States and weak domestic consumption have affected sentiment, increasing calls for policy measures to address deflationary pressures. According to the National Bureau of Statistics, the producer price index fell by 3.3% in May compared to the previous year, worse than the 2.7% drop in April. This marks the steepest contraction in 22 months. Zhiwei Zhang, chief economist at Pinpoint Asset Management, noted ongoing deflationary pressures, citing price wars in the auto sector and renewed declines in property prices after a period of stabilization. Household caution over spending has led some companies to offer discounts, prompting authorities to discourage aggressive pricing strategies. Sluggish factory activity reflects the impact of U.S. tariffs on the global manufacturing hub, while anticipation remains over the outcome of U.S.-China trade talks. In a recent call, U.S. President Donald Trump and Chinese leader Xi Jinping discussed trade issues and critical minerals, leaving key matters for further negotiation. The consumer price index fell by 0.1% last month, slightly better than expected, while core inflation, excluding food and fuel, rose by 0.6%. However, analysts warn that persistent overcapacity may keep China in deflation this year and next.
— new from Reuters
