Coronavirus-led lockdown driven weak external demand pushed factory gate prices in China to experience a larger than expected decline during the month of May. According to data released by the NBS, China’s PPI slumped by 3.7% YoY in May, worse than the economists’ forecast for a 3.3% decline instead.

Producer price deflation is expected to continue into the near future as it could take longer for external demand to recover in the aftermath of the pandemic. Even though several countries around the world have started easing lockdown restrictions and getting back to work, consumer consumption levels are expected to remain under strain for the foreseeable future on account of higher unemployment and uncertainty prevailing in markets.

In more worrying news for China, consumer prices also registered a lesser than expected rise for the month of May. China’s CPI came in at +2.4% YoY in May, against economists’ expectations for a reading of +2.7%. On a monthly basis, consumer prices were down by 0.8% in May.

Food prices rose by 10.6% YoY in May but were down by 3.5% MoM when compared with April. An improvement in food supplies as China emerged out of lockdown helped reduce vegetable prices by 12.5% MoM during the period, while pork prices fell by 8.1% since April.