China Consumer Prices Fall For Fourth Month; Exports Rise

(RTTNews) - China's consumer prices declined for the fourth consecutive month and the decline in producer prices worsened in May, deepening deflation worries among policymakers as domestic demand remained weak despite taking enormous measures to boost consumption. Another report showed an increase in exports in May despite a sharp decline in shipments to the US due to trade tariff uncertainties, while imports posted a bigger-than-expected fall.

The consumer price index slid 0.1 percent year-on-year in May, the same pace of fall as seen in April, the National Bureau of Statistics said Monday.

This was the fourth consecutive month of decline but it was slower than the expected fall of 0.2 percent.

Core inflation that excludes prices of food and energy rose slightly to 0.6 percent in May from 0.5 percent in the previous month.

The annual fall was driven by the 0.4 percent decrease in food prices. At the same time, non-food prices remained flat in May.

In a separate communiqué, the NBS said producer prices slid 3.3 percent on a yearly basis, following a 2.7 percent drop in April. Economists had forecast an annual fall of 3.1 percent.

ING economist Lynn Song said persistent deflationary pressure combined with signs of economic slowdown could combine to allow for the People's Bank of China to ease monetary policy further later in the year.

However, the next cut could take some time as the central bank may choose to observe economic trends for a few months, the economist added.

ING has pushed back their second rate cut timing to the fourth quarter, where a 10-20 bps cut could be expected depending on how the data progresses, Song said.

Elsewhere, data from the customs office showed that China's exports grew 4.8 percent on a yearly basis in May. Nonetheless, this followed a stronger 8.1 percent increase in April and also came in weaker than economists' forecast of 5.0 percent growth.

Imports declined by more-than-expected 3.4 percent in May from the previous year. Imports were forecast to drop 0.9 percent after easing 0.2 percent in April. As a result, the trade surplus rose to $103.2 billion in May, which was above the expected level of $101.1 billion.

Exports to the US plunged 34.5 percent from the previous year. At the same time, imports from the US were down 18 percent.

Earlier this year, US President Donald Trump imposed 145 percent tariffs on China and the latter has retaliated with 125 percent levies on US goods.

After the trade talks in May, the US administration lowered the tariffs on Chinese goods to 30 percent and China reduced levies on US imports to 10 percent.