Deflation might continue to stalk the Eurozone, but for China, May’s small rise in consumer prices means that for another month the weak economy isn’t in danger of dragging our biggest export market down the same path.
China’s consumer-price index rose 2.5% in May from a year earlier, quicker than the 1.8% year-to-year rise in April.
China’s National Bureau of Statistics said yesterday the CPI rose 0.1% from April, when it surprisingly fell 0.3% from March, leading to suggestions that deflationary forces were in danger of capturing the economy.
Some economists saw parallels with the Eurozone’s flirtation with deflation with the CPI only rising by an annual 0.5% in May, others saw some similarities with Japan where weak economic growth for years was made worse by persistent deflation.
But reflecting the sluggishness of the economy, producer prices fell for a 27th month with a fall of 1.4% in May (a 2% drop in April).
This more than any other indicator tells us the how the slow pace of growth in the domestic Chinese economy is keeping a lid on prices and on consumer and business demand. The country has too many companies producing too many products.
China has a 3.5% target for the CPI this year, so the May reading is not a concern.
Chinese inflation remains relatively soft
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But economists point out that the biggest factor behind the rise was higher food prices in the month.
The CPI also increased 0.1% in May from April. In April, it fell 0.3% from the preceding month.
The producer price also fell 0.1% in May from April. In April it fell 0.2% from the preceding month.
Rising food prices were the main contributor to the higher CPI figure.
Food prices increased 4.1% year on year, nearly double the 2.3% rise in April. In the food category, the price of fresh fruits surged 20% in May.
And the China had a solid month of car sales in May, with a 8.5% rise after a 13% jump in April.
The China Association of Automobile Manufacturers said that there were 1.91 million vehicles were sold in China last month, including 1.59 million passenger vehicles. Sales for the first five months sales were up 9% to 9.84 million vehicles.
And data out over the weekend suggests the country’s property sector remains very weak, and in turn that remains one of the key concerns.
Both land sales and transaction values plunged in May across 300 major Chinese cities, figures on a private property website suggests.
Total land sales fell to 1,767 transactions in May in 300 Chinese cities, down 45% from a year ago and 19% lower than in the previous month, according to a survey published on China’s leading real estate website "soufun".
In the same month, the total transaction value for land sales dropped 38% year-on-year and a 30% drop from April.
Media reports said several Chinese cities failed to record any land sales at all in the month.
