China's producer prices extend declines amid sluggish demand

[BEIJING] China's factory gate prices fell for the fifth consecutive month in June but at a slower-than-expected pace, with persistent deflation in the industrial sector highlighting the lasting economic impact of the coronavirus pandemic.

The producer price index (PPI) in June fell 3.0 per cent from a year earlier, China's National Bureau of Statistics (NBS) said in a statement on Thursday, compared with a 3.2 per cent fall tipped by a Reuters poll of analysts and a 3.7 per cent decline in May.

But in a sign of modest improvement in the manufacturing sector, PPI rose 0.4 per cent from the previous month, turning around from a 0.4 per cent decline in May.

Chinese officials have said the economy is recovering from the sharp contraction in the January-March quarter when the coronavirus outbreak in the mainland reached its peak and crippled large parts of the economy.

The pandemic, which has infected more than 12 million and killed about 546,000 globally, has sunk world demand and sent many economies into deflation as factories and retailers shut their doors.

An official survey on the manufacturing sector last week showed that activity expanded at a quicker clip, as Beijing's success in drastically reducing the number of new coronavirus infections has allowed it to reopen the economy in a welcome boost to business and domestic consumption.

But export orders have continued to contract, reflecting the widespread global impact of the Covid-19 pandemic. Many Chinese manufacturers are grappling with falling profits and have been forced to let workers go to cut costs.

NBS data also showed on Thursday that the consumer prices rose 2.5 per cent from a year earlier, in line with forecasts in a Reuters poll and slightly faster from 2.4 per cent growth in May.

REUTERS