China CPI Falls 0.1% YoY in May, PPI Drops 3.3% | Inflation Update

China’s CPI Drops 0.1% in May, PPI Signals Deeper Deflation

China's inflation data for May 2025 showed mixed signals as consumer prices fell less than expected, while producer prices plunged more sharply, underlining persistent deflationary pressures in the world’s second-largest economy.

Consumer Price Index (CPI):

The Consumer Price Index (CPI) declined by 0.1% year-on-year (YoY) in May, as reported by the National Bureau of Statistics (NBS) on Monday. This was slightly better than the market forecast of a 0.2% decline, and it matched the 0.1% fall recorded in April.

CPI (YoY): -0.1% (vs. -0.2% expected)
CPI (MoM): -0.2% (vs. +0.1% in April)

The monthly decline reflects weak domestic demand, even as authorities ramp up policy support.

Producer Price Index (PPI):

On the industrial side, the Producer Price Index (PPI) fell by 3.3% YoY in May, worse than the forecast of a 3.2% drop. This follows a 2.7% YoY decline in April, pointing to deepening deflation in factory gate prices amid sluggish global demand and overcapacity in some sectors.

PPI (YoY): -3.3% (vs. -3.2% expected, -2.7% prior)

This sharp drop in PPI adds pressure on Chinese manufacturers and could influence central bank policy going forward.

Implications for Markets and Policy

The latest inflation report reinforces the deflationary narrative in China and may prompt the People’s Bank of China (PBoC) to consider additional stimulus measures. Meanwhile, global investors remain watchful as low inflation may limit consumption recovery and affect broader Asian market sentiment.