Ahead of the US inflation data and the Fed interest rate decision tonight and early tomorrow respectively, cost pressures continue to show different outcomes in two of Asia’s major economies.
China and Japan both produced reports that showed weakish cost pressures in China, solid, and a bit stronger in Japan.
While China’s consumer inflation was mixed and just short of forecasts, the country’s producer price deflation eased sharply, suggesting that the much-talked-about recovery really does have legs.
The producer price index (PPI) contracted at an annual 1.4% in May, almost half the 2.5% rate in April and a touch better than forecasts around 1.5%.
Month on month, the PPI was up 0.2%, which hints at a positive annual rate in a couple of months if the strength continues.
May marked the 20th month in a row of producer price deflation but the smallest decline since early 2023 as raw material prices rose but consumer goods prices remained weak (hinting at another month of slow retail sales).
The CPI fell 0.1% month on month, but the annual rate remained steady at 0.3% from April. The outcome, though, was a touch weaker than the 0.4% forecast from the market.
Data from the National Bureau of Statistics showed non-food prices again rose month on month – 0.8% vs. 0.9% in April, while food prices fell for the 11th consecutive month, but the fall was the softest since February (-2.0% vs. -2.7%).
Core consumer prices, after excluding food and energy prices, rose 0.6% yoy in May, compared with a 0.7% rise in April.
But it was the 4th successive month of consumer price inflation, which suggests there’s a sluggish recovery in demand.
Japan’s corporate goods inflation rate accelerated to 2.4% in May, topping forecasts and marking the fastest rate of increase since last August.