China's Producer Price Index Declines for 5 Consecutive Months... June PPI Down 3.0% (Update)

Minus Continues Since February, COVID-19 Shock Persists
Improved Compared to Market Expectations, Decline Also Reduced

[Asia Economy Beijing=Special Correspondent Jo Young-shin] China's producer prices have continued to decline for five consecutive months.

Although expectations for economic recovery have increased recently, leading the Chinese stock market into a bull market, it is expected that the real economy recovery will take some time.

On the 9th, the National Bureau of Statistics of China announced that the Producer Price Index (PPI) in June fell by 3.0% compared to the same period last year.

However, this decline was somewhat slower than the previous month (-3.7%) and better than the market expectation (-3.2%).

Since the PPI turned negative in February, when the spread of the novel coronavirus infection (COVID-19) was at its peak, it has increased its monthly decline in March (-1.5%), April (-3.1%), and May (-3.7%).

The PPI, which reflects prices of raw materials, intermediate goods, and product shipment prices, is one of the leading economic indicators that can provide insight into the vitality of manufacturing. Prior to the PPI announcement, there were forecasts in the Chinese financial market that if investment and consumption recover, the economic growth rate in the second quarter is likely to turn positive. Last month, the average daily coal consumption and blast furnace operating rate of China's six major power companies rose to levels similar to the same period last year. Fixed asset investment is also on an increasing trend.

Although the decline in PPI has slowed, the domestic economy in China still appears not to be free from the impact of COVID-19.

Furthermore, as the world shows signs of a resurgence of COVID-19, the pace of recovery in China's external demand is expected to be slow.

The Consumer Price Index (CPI) in June rose by only 2.5% compared to the same month last year. This was similar to the market expectation (2.5%) and the previous month (2.4%). The CPI has stabilized after soaring to 5.4% in January.