Inflation Expected to Be Tepid for Remainder of 2017

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China’s latest CPI and PPI figures have fallen short of expectations, with analysts expecting inflation levels to remain moderate for the remainder of the year.

The latest data from the National Bureau of Statistic indicates that China’s CPI increased 1.5% year-on-year in May, falling short of market expectations, while PPI increased 5.5% year-on-year for its lowest level since the start of 2017.

May CPI fell 0.1% compared to the preceding month, while PPI edged lower 0.3%.

Analysts expect the ongoing deleveraging drive as well as modest gains in interest rates to result in tighter liquidity in the second half of 2017 and a modest fall in aggregate demand,  which will put pressure on prices.

According to Bank of Communications chief economist Lian Ping a decline in economic demand and readjustments to food price increases will weaken upward CPI momentum, with no inflation pressure and no deflation risk for the remainder of the year.

CSC Financial macroeconomics analyst Huang Wentao expects CPI growth to remain at moderate levels, with expanding year-on-year declines in pork and oil prices as well as an easing of price gains for services restraining upward momentum, even as the cost of fresh vegetables and fruit increases.

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